how does money buy happiness essay

Can Money Really Buy Happiness?

Money and happiness are related—but not in the way you think..

Updated November 10, 2023 | Reviewed by Chloe Williams

• More money is linked to increased happiness, some research shows.
• People who won the lottery have greater life satisfaction, even years later.
• Wealth is not associated with happiness globally; non-material things are more likely to predict wellbeing.
• Money, in and of itself, cannot buy happiness, but it can provide a means to the things we value in life.

Money is a big part of our lives, our identities, and perhaps our well-being. Sometimes, it can feel like your happiness hinges on how much cash is in your bank account. Have you ever thought to yourself, “If only I could increase my salary by 12 percent, I’d feel better”? How about, “I wish I had an inheritance. How easier life would be!” I don’t blame you — I’ve had the same thoughts many times.

But what does psychological research say about the age-old question: Can money really buy happiness? Let’s take a brutally honest exploration of how money and happiness are (and aren’t) related. (Spoiler alert: I’ve got bad news, good news, and lots of caveats.)

Higher earners are generally happier

Over 10 years ago, a study based on Gallup Poll data on 1,000 people made a big headline in the news. It found that people with higher incomes report being happier... but only up to an annual income of $75,000 (equivalent to about $90,000 today). After this point, a high emotional well-being wasn’t directly correlated to more money. This seemed to show that once a persons’ basic (and some “advanced”) needs are comfortably met, more money isn’t necessary for well-being.

But a new 2021 study of over one million participants found that there’s no such thing as an inflection point where more money doesn’t equal more happiness, at least not up to an annual salary of $500,000. In this study, participants’ well-being was measured in more detail. Instead of being asked to remember how well they felt in the past week, month, or year, they were asked how they felt right now in the moment. And based on this real-time assessment, very high earners were feeling great.

Similarly, a Swedish study on lottery winners found that even after years, people who won the lottery had greater life satisfaction, mental health, and were more prepared to face misfortune like divorce , illness, and being alone than regular folks who didn’t win the lottery. It’s almost as if having a pile of money made those things less difficult to cope with for the winners.

Evaluative vs. experienced well-being

At this point, it's important to suss out what researchers actually mean by "happiness." There are two major types of well-being psychologists measure: evaluative and experienced. Evaluative well-being refers to your answer to, “How do you think your life is going?” It’s what you think about your life. Experienced well-being, however, is your answer to, “What emotions are you feeling from day to day, and in what proportions?” It is your actual experience of positive and negative emotions.

In both of these studies — the one that found the happiness curve to flatten after $75,000 and the one that didn't — the researchers were focusing on experienced well-being. That means there's a disagreement in the research about whether day-to-day experiences of positive emotions really increase with higher and higher incomes, without limit. Which study is more accurate? Well, the 2021 study surveyed many more people, so it has the advantage of being more representative. However, there is a big caveat...

Material wealth is not associated with happiness everywhere in the world

If you’re not a very high earner, you may be feeling a bit irritated right now. How unfair that the rest of us can’t even comfort ourselves with the idea that millionaires must be sad in their giant mansions!

But not so fast.

Yes, in the large million-person study, experienced well-being (aka, happiness) did continually increase with higher income. But this study only included people in the United States. It wouldn't be a stretch to say that our culture is quite materialistic, more so than other countries, and income level plays a huge role in our lifestyle.

Another study of Mayan people in a poor, rural region of Yucatan, Mexico, did not find the level of wealth to be related to happiness, which the participants had high levels of overall. Separately, a Gallup World Poll study of people from many countries and cultures also found that, although higher income was associated with higher life evaluation, it was non-material things that predicted experienced well-being (e.g., learning, autonomy, respect, social support).

Earned wealth generates more happiness than inherited wealth

More good news: For those of us with really big dreams of “making it” and striking it rich through talent and hard work, know that the actual process of reaching your dream will not only bring you cash but also happiness. A study of ultra-rich millionaires (net worth of at least $8,000,000) found that those who earned their wealth through work and effort got more of a happiness boost from their money than those who inherited it. So keep dreaming big and reaching for your entrepreneurial goals … as long as you’re not sacrificing your actual well-being in the pursuit.

There are different types of happiness, and wealth is better for some than others

We’ve been talking about “happiness” as if it’s one big thing. But happiness actually has many different components and flavors. Think about all the positive emotions you’ve felt — can we break them down into more specifics? How about:

• Contentment
• Gratefulness

...and that's just a short list.

It turns out that wealth may be associated with some of these categories of “happiness,” specifically self-focused positive emotions such as pride and contentment, whereas less wealthy people have more other-focused positive emotions like love and compassion.

In fact, in the Swedish lottery winners study, people’s feelings about their social well-being (with friends, family, neighbors, and society) were no different between lottery winners and regular people.

Money is a means to the things we value, not happiness itself

One major difference between lottery winners and non-winners, it turns out, is that lottery winners have more spare time. This is the thing that really makes me envious , and I would hypothesize that this is the main reason why lottery winners are more satisfied with their life.

Consider this simply: If we had the financial security to spend time on things we enjoy and value, instead of feeling pressured to generate income all the time, why wouldn’t we be happier?

This is good news. It’s a reminder that money, in and of itself, cannot literally buy happiness. It can buy time and peace of mind. It can buy security and aesthetic experiences, and the ability to be generous to your family and friends. It makes room for other things that are important in life.

In fact, the researchers in that lottery winner study used statistical approaches to benchmark how much happiness winning $100,000 brings in the short-term (less than one year) and long-term (more than five years) compared to other major life events. For better or worse, getting married and having a baby each give a bigger short-term happiness boost than winning money, but in the long run, all three of these events have the same impact.

What does this mean? We make of our wealth and our life what we will. This is especially true for the vast majority of the world made up of people struggling to meet basic needs and to rise out of insecurity. We’ve learned that being rich can boost your life satisfaction and make it easier to have positive emotions, so it’s certainly worth your effort to set goals, work hard, and move towards financial health.

But getting rich is not the only way to be happy. You can still earn health, compassion, community, love, pride, connectedness, and so much more, even if you don’t have a lot of zeros in your bank account. After all, the original definition of “wealth” referred to a person’s holistic wellness in life, which means we all have the potential to be wealthy... in body, mind, and soul.

Kahneman, D., & Deaton, A.. High income improves evaluation of life but not emotional well-being. . Proceedings of the national academy of sciences. 2010.

Killingsworth, M. A. . Experienced well-being rises with income, even above $75,000 per year .. Proceedings of the National Academy of Sciences. 2021.

Lindqvist, E., Östling, R., & Cesarini, D. . Long-run effects of lottery wealth on psychological well-being. . The Review of Economic Studies. 2020.

Guardiola, J., González‐Gómez, F., García‐Rubio, M. A., & Lendechy‐Grajales, Á.. Does higher income equal higher levels of happiness in every society? The case of the Mayan people. . International Journal of Social Welfare. 2013.

Diener, E., Ng, W., Harter, J., & Arora, R. . Wealth and happiness across the world: material prosperity predicts life evaluation, whereas psychosocial prosperity predicts positive feeling. . Journal of personality and social psychology. 2010.

Donnelly, G. E., Zheng, T., Haisley, E., & Norton, M. I.. The amount and source of millionaires’ wealth (moderately) predict their happiness . . Personality and Social Psychology Bulletin. 2018.

Piff, P. K., & Moskowitz, J. P. . Wealth, poverty, and happiness: Social class is differentially associated with positive emotions.. Emotion. 2018.

Jade Wu, Ph.D., is a clinical health psychologist and host of the Savvy Psychologist podcast. She specializes in helping those with sleep problems and anxiety disorders.

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Does More Money Really Make Us More Happy?

• Elizabeth Dunn
• Chris Courtney

A big paycheck won’t necessarily bring you joy

Although some studies show that wealthier people tend to be happier, prioritizing money over time can actually have the opposite effect.

• But even having just a little bit of extra cash in your savings account ($500), can increase your life satisfaction. So how can you keep more cash on hand?
• Ask yourself: What do I buy that isn’t essential for my survival? Is the expense genuinely contributing to my happiness? If the answer to the second question is no, try taking a break from those expenses.
• Other research shows there are specific ways to spend your money to promote happiness, such as spending on experiences, buying time, and investing in others.
• Spending choices that promote happiness are also dependent on individual personalities, and future research may provide more individualized advice to help you get the most happiness from your money.

Where your work meets your life. See more from Ascend here .

How often have you willingly sacrificed your free time to make more money? You’re not alone. But new research suggests that prioritizing money over time may actually undermine our happiness.

• ED Elizabeth Dunn is a professor of psychology at the University of British Columbia and Chief Science Officer of Happy Money, a financial technology company with a mission to help borrowers become savers. She is also co-author of “ Happy Money: The Science of Happier Spending ” with Dr. Michael Norton. Her TED2019 talk on money and happiness was selected as one of the top 10 talks of the year by TED.
• CC Chris Courtney is the VP of Science at Happy Money. He utilizes his background in cognitive neuroscience, human-computer interaction, and machine learning to drive personalization and engagement in products designed to empower people to take control of their financial lives. His team is focused on creating innovative ways to provide more inclusionary financial services, while building tools to promote financial and psychological well-being and success.

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Happiness Economics: Can Money Buy Happiness?

It only costs a small amount, a slight risk, with the possibility of a substantial reward.

But will it make you happy? Will it give you long-lasting happiness?

Undoubtedly, there will be a temporary peak in happiness, but will all your troubles finally fade away?

That is what we will investigate today. We explore the economics of happiness and whether money can buy happiness. In this post, we will start by broadly exploring the topic and then look at theories and substantive research findings. We’ll even have a look at previous lottery winners.

For interested readers, we will list interesting books and podcasts for further enjoyment and share a few of our own happiness resources.

Ka-ching: Let’s get rolling!

Before you continue, we thought you might like to download our three Happiness & Subjective Wellbeing Exercises for free . These detailed, science-based exercises will help you or your clients identify sources of authentic happiness and strategies to boost wellbeing.

This Article Contains

What is happiness economics, theory of the economics of happiness, can money buy happiness 5 research findings, 6 fascinating books and podcasts on the topic, resources from positivepsychology.com, a take-home message.

Happiness economics is a field of economics that recognizes happiness and wellbeing as important outcome measures, alongside measures typically used, such as employment, education, and health care.

Economics emphasizes how specific economic/financial characteristics affect our wellbeing (Easterlin, 2004).

For example, does employment result in better health and longer lifespan, among other metrics? Do people in wealthier countries have access to better education and longer life spans?

In the last few decades, there has been a shift in economics, where researchers have recognized the importance of the subjective rating of happiness as a valuable and desirable outcome that is significantly correlated with other important outcomes, such as health (Steptoe, 2019) and productivity (DiMaria et al., 2020).

Broadly, happiness is a psychological state of being, typically researched and defined using psychological methods. We often measure it using self-report measures rather than objective measures that are less vulnerable to misinterpretation and error.

Including happiness in economics has opened up an entirely new avenue of research to explore the relationship between happiness and money.

Andrew Clark (2018) illustrates the variability in the term happiness economics with the following examples:

• Happiness can be a predictor variable, influencing our decisions and behaviors.
• Happiness might be the desired outcome, so understanding how and why some people are happier than others is essential.

However, the connection between our behavior and happiness must be better understood. Even though “being happy” is a desired outcome, people still make decisions that prevent them from becoming happier. For example, why do we choose to work more if our work does not make us happier? Why are we unhappy even if our basic needs are met?

An example of how happiness can influence decision-making

Sometimes, we might choose not to maximize a monetary or financial gain but place importance on other, more subjective outcomes.

To illustrate: If faced with two jobs — one that pays well but will bring no joy and another that pays less but will bring much joy — some people would prefer to maximize their happiness over financial gain.

If this decision were evaluated using a utility framework where the only valued outcomes were practical, then the decision would seem irrational. However, this scenario suggests that psychological outcomes, such as the experience of happiness, are as crucial as other socio-economic outcomes.

Economists recognize that subjective wellbeing , or happiness, is an essential characteristic and sometimes a desirable outcome that can motivate our decision-making.

In the last few decades, economics has shifted to include happiness as a measurable and vital part of general wellbeing (Graham, 2005).

The consequence is that typical economic questions now also look at the impact of employment, finances, and other economic metrics on the subjective rating and experience of happiness at individual and country levels.

Happiness is such a vital outcome in society and economic activity that it must be involved in policy making. The subjective measure of happiness is as important as other typical measures used in economics.

Many factors can contribute to happiness. In this post, we consider the role of money. The relationship between happiness, or subjective wellbeing, and money is assumed to be positive: More money means greater happiness.

However, the relationship between money and happiness is paradoxical: More money does not guarantee happiness (for an excellent review, see Graham, 2005).

Specifically, low levels of income are correlated with unhappiness. However, as our individual wealth increases and our basic needs are met, our needs change and differ in their importance.

Initially, our happiness is affected by absolute levels of income, but at a certain threshold, we place importance on relative levels of income. Knowing how we rank and compare to other people, in terms of wealth and material possession, influences our happiness.

The relationship between wealth and happiness continues to increase, but only to a certain point; at this stage, more wealth does not guarantee more happiness (Easterlin, 1974; Diener et al., 1993).

This may be at odds with our everyday lived experience. Most of us choose to work longer hours or multiple jobs so that we make more money. However, what is the point of doing this if money does not increase our happiness? Why do we seem to think that more money will make us happier?

History of the economics of happiness

The relationship between economics and happiness originated in the early 1970s. Brickman and Campbell (1971, as cited in Brickman et al., 1978) first argued that the typical outcomes of a successful life, such as wealth or income, had no impact on individual wellbeing.

Easterlin (1974) expanded these results and showed that although wealthier people tend to be happier than poor people in the same country, the average happiness levels within a country remained unchanged even as the country’s overall wealth increased.

The inconsistent relationship between happiness and income and its sensitivity to critical income thresholds make this topic so interesting.

There is some evidence that wealthier countries are happier than others, but only when comparing the wealthy with the poor (Easterlin, 1974; Graham, 2005).

As countries become wealthier, citizens report higher happiness, but this relationship is strongest when the starting point is poverty. Above a certain income threshold, happiness no longer increases (Diener et al., 1993).

Interestingly, people tend to agree on the amount of money needed to make them happy; but beyond a certain value, there is little increase in happiness (Haesevoets et al., 2022).

Measurement challenges

Measuring happiness accurately and reliably is challenging. Researchers disagree on what happiness means.

It is not the norm in economics to measure happiness by directly asking a participant how happy they are; instead, happiness is inferred through:

• Subjective wellbeing (Clark, 2018; Easterlin, 2004)
• A combination of happiness and life satisfaction (Bruni, 2007)

Furthermore, happiness can refer to an acute psychological state, such as feeling happy after a nice meal, or a lasting state similar to contentment (Nettle, 2005).

Researchers might use different definitions of happiness and ways to measure it, thus leading to contradictory results. For example, happiness might be used synonymously with subjective wellbeing and can refer to several things, including life satisfaction and financial satisfaction (Diener & Oishi, 2000).

It seems contradictory that wealthier nations are not happier overall than poorer nations and that increasing the wealth of poorer nations does not guarantee that their happiness will increase too. What could then be done to increase happiness?

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What is the relationship between income/wealth and happiness? To answer that question, we looked at studies to see where and how money improves happiness, but we’ll also consider the limitations to the positive effect of income.

Money buys access; jobs boost happiness

Overwhelming evidence shows that wealth is correlated with measures of wellbeing.

Wealthier people have access to better healthcare, education, and employment, which in turn results in higher life satisfaction (Helliwell et al., 2012). A certain amount of wealth is needed to meet basic needs, and satisfying these needs improves happiness (Veenhoven & Ehrhardt, 1995).

Increasing happiness through improved quality of life is highest for poor households, but this is explained by the starting point. Access to essential services improves the quality of life, and in turn, this improves measures of wellbeing.

Most people gain wealth through employment; however, it is not just wealth that improves happiness; instead, employment itself has an important association with happiness. Happiness and employment are also significantly correlated with each other (Helliwell et al., 2021).

Lockdown on happiness

The World Happiness Report (Helliwell et al., 2021) reports that unemployment increased during the COVID-19 pandemic, and this was accompanied by a marked decline in happiness and optimism.

The pandemic also changed how we evaluated certain aspects of our lives; for example, the relationship between income and happiness declined. After all, what is the use of money if you can’t spend it? In contrast, the association between happiness and having a partner increased (Helliwell et al., 2021).

Wealthier states smile more, but is it real?

If we took a snapshot of happiness and a country’s wealth, we would find that richer countries tend to have happier populations than poorer countries.

For example, based on the 2021 World Happiness Report, the top five happiest countries — which are also wealthy countries — are Finland, Iceland, Denmark, Switzerland, and the Netherlands (Helliwell et al., 2021).

In contrast, the unhappiest countries are those that tend to be emerging markets or have a lower gross domestic product (GDP), e.g., Zimbabwe, Tanzania, and India (Graham, 2005; Helliwell et al., 2021).

At face value, this makes sense: Poorer countries most likely have other factors associated with them, e.g., higher unemployment, more crime, and less political stability. So, based on this cross-sectional data, a country’s wealth and happiness levels appear to be correlated. However, over a more extended period, the relationship between happiness and GDP is nil (Easterlin, 2004).

That is, the subjective wellbeing of a population does not increase as a country becomes richer. Even though the wealth of various countries worldwide has increased over time, the overall happiness levels have not increased similarly or have remained static (Kahneman et al., 2006). This is known as a happiness–income paradox.

Easterlin (2004) posits four explanations for this finding:

• Societal and individual gains associated with increased wealth are concentrated among the extremely wealthy.
• Our degree of happiness is informed by how we compare to other people, and this relative comparison does not change as country-wide wealth increases.
• Happiness is not limited to only wealth and financial status, but is affected by other societal and political factors, such as crime, education, and trust in the government.
• Long-term satisfaction and contentment differ from short-term, acute happiness.

Kahneman et al. (2006) provide an alternative explanation centered on the method typically used by researchers. Specifically, they argue that the order of the questions asked to measure happiness and how these questions are worded have a focusing effect. Through the question, the participant’s attention to their happiness is sharpened — like a lens in a camera — and their happiness needs to be over- or underestimated.

Kahneman et al. (2006) also point out that job advancements like a raise or a promotion are often accompanied by an increase in salary and work hours. Consequently, high-paying jobs often result in less leisure time available to spend with family or on hobbies and can cause more unhappiness.

Not all that glitters is gold

Extensive research explored whether a sudden financial windfall was associated with a spike in happiness (e.g., Sherman et al., 2020). The findings were mixed. Sometimes, having more money is associated with increased life satisfaction and improved physical and mental health.

This boost in happiness, however, is not guaranteed, nor is it long. Sometimes, individuals even wish it had never happened (Brickman et al., 1978; Sherman et al., 2020).

Consider lottery winners. These people win sizable sums of money — typically more extensive than a salary increase — large enough to impact their lives significantly. Despite this, research has consistently shown that although lottery winners report higher immediate, short-term happiness, they do not experience higher long-term happiness (Sherman et al., 2020).

Here are some reasons for this:

• Previous everyday activities and experiences become less enjoyable when compared to a unique, unusual experience like winning the lottery.
• People habituate to their new lifestyle.
• A sudden increase in wealth can disrupt social relationships among friends and family members.
• Work and hobbies typically give us small nuggets of joy over a more extended period (Csikszentmihalyi et al., 2005). These activities can lose their meaning over a longer period, resulting in more unhappiness (Sherman et al., 2020; Brickman et al., 1978).

Sherman et al. (2020) further argue that lottery winners who decide to quit their job after winning, but do not fill this newly available time with some type of meaningful hobby or interest, are also more likely to become unhappy.

Passive activities do not provide the same happiness as work or hobbies. Instead, if lottery winners continue to take part in activities that give them meaning and require active engagement, then they can avoid further unhappiness.

Happiness: Is it temperature or climate?

Like most psychological research, part of the challenge is clearly defining the topic of investigation — a task made more daunting when the topic falls within two very different fields.

Nettle (2005) describes happiness as a three-tiered concept, ranging from short-lived but intense on one end of the spectrum to more abstract and deep on the other.

The first tier refers to transitory feelings of joy, like when one opens up a birthday present.

The second tier describes judgments about feelings, such as feeling satisfied with your job. The third tier is more complex and refers to life satisfaction.

Across research, different definitions are used: Participants are asked about feelings of (immediate) joy, overall life satisfaction, moments of happiness or satisfaction, and mental wellbeing . The concepts are similar but not identical, thus influencing the results.

Most books on happiness economics are textbooks. Although no doubt very interesting, they’re not the easy-reading books we prefer to recommend.

Instead, below you will find a range of books written by economists that explore happiness. These should provide a good springboard on the overall topic of happiness and what influences it, in case any of our readers want to pick up a more in-depth textbook afterward.

If you have a happiness book you would recommend, please let us know in the comments section.

1. Happiness: Lessons from a New Science – Richard Layard

Richard Layard, a lead economist based in London, explores in his book if and how money can affect happiness.

Layard does an excellent job of introducing topics from various fields and framing them appropriately for the reader.

The book is aimed at readers from varying academic and professional backgrounds, so no experience is needed to enjoy it.

Find the book on Amazon .

2. Happiness by Design: Change What You Do, Not How You Think – Paul Dolan

This book has a more practical spin. The author explains how we can use existing research and theories to make small changes to increase our happiness.

Paul Dolan’s primary thesis is that practical things will have a bigger effect than abstract methods, and we should change our behavior rather than our thinking.

The book is a quick read (airport-perfect!), and Daniel Kahneman penned the foreword.

3. The Psychology of Money: Timeless Lessons on Wealth, Greed and Happiness – Morgan Housel

This book is not necessarily about happiness economics, but it is close enough to the overall theme that it is worth mentioning.

Since most people are concerned with making more money, this book helps teach the reader why we make the decisions we do and how we make better decisions about our money.

This book is a worthwhile addition to any bookcase if you are interested in the relationship between finances and psychology in general.

4. Happiness: The Science Behind Your Smile – Daniel Nettle

If you are interested in happiness overall, then we recommend Happiness: The Science Behind Your Smile by Daniel Nettle, a professor of behavioral science at Newcastle University.

In this book, he takes a scientific approach to explaining happiness, starting with an in-depth exploration of the definition of happiness and some of its challenges.

The research that he presents comes from various fields, including social sciences, medicine, neurobiology, and economics.

Because of its small size, this book is perfect for a weekend away or to read on a plane.

5 & 6. Prefer to listen rather than read?

One of our favorite podcasts is Intelligence2, where leading experts in a particular field gather to debate a particular topic.

This show’s host, Dr. Laurie Santos, argues that we can increase our happiness by not hoarding our money for ourselves but by giving it to others instead. If you are interested in this episode , or any of the other episodes in the Happiness Lab podcast series, then head on over to their page.

There are several resources available at PositivePsychology.com for our readers to use in their professional and personal development.

In this section, you’ll find a few that should supplement any work on happiness and economics. Since the undercurrent of the topic is whether happiness can be improved through wealth, a few resources look at happiness overall.

Valued Living Masterclass

Although knowledge is power, knowing that money does not guarantee happiness does not mean that clients will suddenly feel fulfilled and satisfied with their lives.

For this reason, we recommend the Valued Living Masterclass , for professionals to help their clients find meaning in their lives. Rather than keeping up with the Joneses or chasing a high-paying job, professionals can help their clients connect with their inner meaning (i.e., their why ) as a way to find meaning and gain happiness.

Three free exercises

If you want to try it out before committing, look at the Meaning & Valued Living exercise pack , which includes three exercises for free.

Recommended reading

Read our post on Success Versus Happiness for further information on balancing happiness with success, in any domain . This topic is poignant for readers who conflate happiness and success, and will guide readers to better understand their relationship and how the two terms influence each other.

For readers who wonder about altruism , you would find it interesting that rather than hoarding, you can increase your happiness through volunteering and donating. In this post, the author, Dr. Jeremy Sutton, does a fabulous job of approaching altruism from various fields and provides excellent resources for further reading and real-life application.

Our last recommendation is for readers who want to know more about measuring subjective wellbeing and happiness . The post lists various tests and apps that can measure happiness and the overall history of how happiness was measured and defined. This is a good starting point for researchers or clinicians who want to explore happiness economics professionally.

17 Happines Exercises

If you’re looking for more science-based ways to help others develop strategies to boost their wellbeing, this collection contains 17 validated happiness and wellbeing exercises . Use them to help others pursue authentic happiness and work toward a  life filled with purpose and meaning

17 Exercises To Increase Happiness and Wellbeing

Add these 17 Happiness & Subjective Well-Being Exercises [PDF] to your toolkit and help others experience greater purpose, meaning, and positive emotions.

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As you’ve seen in our article, the evidence overwhelmingly clarifies that money does not guarantee more happiness … well, long-term happiness.

Our happiness is relative since we compare ourselves to other people, and over time, as we become accustomed to our wealth, we lose all the happiness gains we made.

Money can ease financial and social difficulties; consequently, it can drastically improve people’s living conditions, life expectancy, and education.

Improvements in these outcomes have a knock-on effect on the overall experience of one’s life and the opportunities for one’s family and children. Nevertheless, better opportunities do not guarantee happiness.

Our intention with this post was to illustrate some complexities surrounding the relationship between money and happiness.

Knowing that money does not guarantee happiness, we recommend less expensive methods to improve one’s happiness:

• Spend time with friends.
• Cultivate hobbies and interests.
• Stay active and eat healthy.
• Try to live a meaningful life.
• Give some love (go smooch your partner or tickle your dog’s belly).

Diamonds might be a girl’s best friend, but money is a fair weather one, at best.

We hope you enjoyed reading this article. Don’t forget to download our three Happiness Exercises for free .

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• Bruni, L. (2007). Handbook on the economics of happiness . Edward Elgar.
• Clark, A. E. (2018). Four decades of the economics of happiness: Where next? Review of Income and Wealth , 64 (2), 245–269.
• Csikszentmihalyi, M., Abuhamdeh, S., & Nakamura, J. (2005). Flow. In A. J. Elliot & C. S. Dweck (Eds.), Handbook of competence and motivation (pp. 598–608). Guilford Publications.
• Diener, E., Sandvik, E., Seidlitz, L., & Diener, M. (1993). The relationship between income and subjective well-being: Relative or absolute? Social Indicators Research , 28 , 195–223.
• Diener, E., & Oishi, S. (2000). Money and happiness: Income and subjective well-being across nations. Culture and Subjective Well-Being , 185 , 218.
• DiMaria, C. H., Peroni, C., & Sarracino, F. (2020). Happiness matters: Productivity gains from subjective well-being. Journal of Happiness Studies , 21 (1), 139–160.
• Easterlin, R. A. (1974). Does economic growth improve the human lot? Some empirical evidence. In P. A. David & M. W. Reder (Eds.), Nations and households in economic growth: Essays in honor of Moses Abramovitz (pp. 89–125). Academic Press.
• Easterlin, R. A. (2004). The economics of happiness. Daedalus , 133 (2), 26–33.
• Graham, C. (2005). The economics of happiness. World Economics , 6 (3), 41–55.
• Haesevoets, T., Dierckx, K., & Van Hiel, A. (2022). Do people believe that you can have too much money? The relationship between hypothetical lottery wins and expected happiness. Judgment and Decision Making , 17 (6), 1229–1254.
• Helliwell, J., Layard, R., & Sachs, J. (Eds.) (2012). World happiness report . The Earth Institute, Columbia University.
• Helliwell, J. F., Layard, R., Sachs, J. D., & Neve, J. E. D. (2021). World happiness report 2021 .
• Kahneman, D., Krueger, A. B., Schkade, D., Schwarz, N., & Stone, A. A. (2006). Would you be happier if you were richer? A focusing illusion. Science , 312 (5782), 1908–1910.
• Nettle, D. (2005). Happiness: The science behind your smile . Oxford University Press.
• Sherman, A., Shavit, T., & Barokas, G. (2020). A dynamic model on happiness and exogenous wealth shock: The case of lottery winners. Journal of Happiness Studies , 21 , 117–137.
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• Veenhoven, R., & Ehrhardt, J. (1995). The cross-national pattern of happiness: Test of predictions implied in three theories of happiness. Social Indicators Research , 34 , 33–68.

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Guest Essay

The Nobel Winner Who Liked to Collaborate With His Adversaries

By Cass R. Sunstein

Mr. Sunstein is a law professor at Harvard and an author of “Noise,” with Daniel Kahneman and Olivier Sibony.

Our all-American belief that money really does buy happiness is roughly correct for about 85 percent of us. We know this thanks to the latest and perhaps final work of Daniel Kahneman, the Nobel Prize winner who insisted on the value of working with those with whom we disagree.

Professor Kahneman, who died last week at the age of 90, is best known for his pathbreaking explorations of human judgment and decision making and of how people deviate from perfect rationality. He should also be remembered for a living and working philosophy that has never been more relevant: his enthusiasm for collaborating with his intellectual adversaries. This enthusiasm was deeply personal. He experienced real joy working with others to discover the truth, even if he learned that he was wrong (something that often delighted him).

Back to that finding, published last year , that for a strong majority of us, more is better when it comes to money. In 2010, Professor Kahneman and the Princeton economist Angus Deaton (also a Nobel Prize winner) published a highly influential essay that found that, on average, higher-income groups show higher levels of happiness — but only to a point. Beyond a threshold at or below $90,000, Professor Kahneman and Professor Deaton found, there is no further progress in average happiness as income increases.

Eleven years later, Matthew Killingsworth, a senior fellow at the Wharton School of the University of Pennsylvania, found exactly the opposite : People with higher income reported higher levels of average happiness. Period. The more money people have, the happier they are likely to be.

What gives? You could imagine some furious exchange in which Professor Kahneman and Professor Deaton made sharp objections to Dr. Killingsworth’s paper, to which Dr. Killingsworth answered equally sharply, leaving readers confused and exhausted.

Professor Kahneman saw such a dynamic as “angry science,” which he described as a “nasty world of critiques, replies and rejoinders” and “as a contest, where the aim is to embarrass.” As Professor Kahneman put it, those who live in that nasty world offer “a summary caricature of the target position, refute the weakest argument in that caricature and declare the total destruction of the adversary’s position.” In his account, angry science is “a demeaning experience.” That dynamic might sound familiar, particularly in our politics.

Instead, Professor Kahneman favored an alternative that he termed “adversarial collaboration.” When people who disagree work together to test a hypothesis, they are involved in a common endeavor. They are trying not to win but to figure out what’s true. They might even become friends.

In that spirit, Professor Kahneman, well into his 80s, asked Dr. Killingsworth to collaborate, with the help of a friendly arbiter, Prof. Barbara Mellers, an influential and widely admired psychologist. Their task was to look closely at Dr. Killingsworth’s data to see whether he had analyzed it properly and to understand what, if anything, had been missed by Professor Kahneman and Professor Deaton.

Their central conclusion was simple. Dr. Killingsworth missed a threshold effect in his data that affected only one group: the least happy 15 percent. For these largely unhappy people, average happiness does grow with rising income, up to a level of around $100,000, but it stops growing after that. For a majority of us, by contrast, average happiness keeps growing with increases in income.

Both sides were partly right and partly wrong. Their adversarial collaboration showed that the real story is more interesting and more complicated than anyone saw individually.

Professor Kahneman engaged in a number of adversarial collaborations, with varying degrees of success. His first (and funniest) try was with his wife, the distinguished psychologist Anne Treisman. Their disagreement never did get resolved. (Dr. Treisman died in 2018.) Both of them were able to explain away the results of their experiments — a tribute to what he called “the stubborn persistence of challenged beliefs.” Still, adversarial collaborations sometimes produce both agreement and truth, and he said that “a common feature of all my experiences has been that the adversaries ended up on friendlier terms than they started.”

Professor Kahneman meant both to encourage better science and to strengthen the better angels of our nature. In academic life, adversarial collaborations hold great value . We could easily imagine a situation in which adversaries routinely collaborated to see if they could resolve disputes about the health effects of air pollutants, the consequences of increases in the minimum wage, the harms of climate change or the deterrent effects of the death penalty.

And the idea can be understood more broadly. In fact, the U.S. Constitution should be seen as an effort to create the conditions for adversarial collaboration. Before the founding, it was often thought that republics could work only if people were relatively homogeneous — if they were broadly in agreement with one another. Objecting to the proposed Constitution, the pseudonymous antifederalist Brutus emphasized this point: “In a republic, the manners, sentiments and interests of the people should be similar. If this be not the case, there will be a constant clashing of opinions, and the representatives of one part will be continually striving against those of the other.”

Those who favored the Constitution thought that Brutus had it exactly backward. In their view, the constant clashing of opinions was something not to fear but to welcome, at least if people collaborate — if they act as if they are engaged in a common endeavor. Sounding a lot like Professor Kahneman, Alexander Hamilton put it this way : “The differences of opinion, and the jarrings of parties” in the legislative department of the government “often promote deliberation and circumspection and serve to check excesses in the majority.”

Angry science is paralleled by angry democracy, a “nasty world of critiques, replies and rejoinders,” whose “aim is to embarrass,” Professor Kahneman said. That’s especially true, of course, in the midst of political campaigns, when the whole point is to win.

Still, the idea of adversarial collaboration has never been more important. Within organizations of all kinds — including corporations, nonprofits, think tanks and government agencies — sustained efforts should be made to lower the volume by isolating the points of disagreement and specifying tests to establish what’s right. Asking how a disagreement might actually be resolved tends to turn enemies, focused on winning and losing, into teammates, focused on truth.

As usual, Professor Kahneman was right. We could use a lot more of that.

Cass R. Sunstein is a law professor at Harvard and an author of “Noise,” with Daniel Kahneman and Olivier Sibony.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips . And here’s our email: [email protected] .

Follow the New York Times Opinion section on Facebook , Instagram , TikTok , WhatsApp , X and Threads .

More Proof That Money Can Buy Happiness (or a Life with Less Stress)

When we wonder whether money can buy happiness, we may consider the luxuries it provides, like expensive dinners and lavish vacations. But cash is key in another important way: It helps people avoid many of the day-to-day hassles that cause stress, new research shows.

Money can provide calm and control, allowing us to buy our way out of unforeseen bumps in the road, whether it’s a small nuisance, like dodging a rainstorm by ordering up an Uber, or a bigger worry, like handling an unexpected hospital bill, says Harvard Business School professor Jon Jachimowicz.

“If we only focus on the happiness that money can bring, I think we are missing something,” says Jachimowicz, an assistant professor of business administration in the Organizational Behavior Unit at HBS. “We also need to think about all of the worries that it can free us from.”

The idea that money can reduce stress in everyday life and make people happier impacts not only the poor, but also more affluent Americans living at the edge of their means in a bumpy economy. Indeed, in 2019, one in every four Americans faced financial scarcity, according to the Board of Governors of the Federal Reserve System. The findings are particularly important now, as inflation eats into the ability of many Americans to afford basic necessities like food and gas, and COVID-19 continues to disrupt the job market.

Buying less stress

The inspiration for researching how money alleviates hardships came from advice that Jachimowicz’s father gave him. After years of living as a struggling graduate student, Jachimowicz received his appointment at HBS and the financial stability that came with it.

“My father said to me, ‘You are going to have to learn how to spend money to fix problems.’” The idea stuck with Jachimowicz, causing him to think differently about even the everyday misfortunes that we all face.

To test the relationship between cash and life satisfaction, Jachimowicz and his colleagues from the University of Southern California, Groningen University, and Columbia Business School conducted a series of experiments, which are outlined in a forthcoming paper in the journal Social Psychological and Personality Science , The Sharp Spikes of Poverty: Financial Scarcity Is Related to Higher Levels of Distress Intensity in Daily Life .

Higher income amounts to lower stress

In one study, 522 participants kept a diary for 30 days, tracking daily events and their emotional responses to them. Participants’ incomes in the previous year ranged from less than $10,000 to $150,000 or more. They found:

• Money reduces intense stress: There was no significant difference in how often the participants experienced distressing events—no matter their income, they recorded a similar number of daily frustrations. But those with higher incomes experienced less negative intensity from those events.
• More money brings greater control : Those with higher incomes felt they had more control over negative events and that control reduced their stress. People with ample incomes felt more agency to deal with whatever hassles may arise.
• Higher incomes lead to higher life satisfaction: People with higher incomes were generally more satisfied with their lives.

“It’s not that rich people don’t have problems,” Jachimowicz says, “but having money allows you to fix problems and resolve them more quickly.”

Why cash matters

In another study, researchers presented about 400 participants with daily dilemmas, like finding time to cook meals, getting around in an area with poor public transportation, or working from home among children in tight spaces. They then asked how participants would solve the problem, either using cash to resolve it, or asking friends and family for assistance. The results showed:

• People lean on family and friends regardless of income: Jachimowicz and his colleagues found that there was no difference in how often people suggested turning to friends and family for help—for example, by asking a friend for a ride or asking a family member to help with childcare or dinner.
• Cash is the answer for people with money: The higher a person’s income, however, the more likely they were to suggest money as a solution to a hassle, for example, by calling an Uber or ordering takeout.

While such results might be expected, Jachimowicz says, people may not consider the extent to which the daily hassles we all face create more stress for cash-strapped individuals—or the way a lack of cash may tax social relationships if people are always asking family and friends for help, rather than using their own money to solve a problem.

“The question is, when problems come your way, to what extent do you feel like you can deal with them, that you can walk through life and know everything is going to be OK,” Jachimowicz says.

Breaking the ‘shame spiral’

In another recent paper , Jachimowicz and colleagues found that people experiencing financial difficulties experience shame, which leads them to avoid dealing with their problems and often makes them worse. Such “shame spirals” stem from a perception that people are to blame for their own lack of money, rather than external environmental and societal factors, the research team says.

“We have normalized this idea that when you are poor, it’s your fault and so you should be ashamed of it,” Jachimowicz says. “At the same time, we’ve structured society in a way that makes it really hard on people who are poor.”

For example, Jachimowicz says, public transportation is often inaccessible and expensive, which affects people who can’t afford cars, and tardy policies at work often penalize people on the lowest end of the pay scale. Changing those deeply-engrained structures—and the way many of us think about financial difficulties—is crucial.

After all, society as a whole may feel the ripple effects of the financial hardships some people face, since financial strain is linked with lower job performance, problems with long-term decision-making, and difficulty with meaningful relationships, the research says. Ultimately, Jachimowicz hopes his work can prompt thinking about systemic change.

“People who are poor should feel like they have some control over their lives, too. Why is that a luxury we only afford to rich people?” Jachimowicz says. “We have to structure organizations and institutions to empower everyone.”

[Image: iStockphoto/mihtiander]

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Here’s How Money Really Can Buy You Happiness

The following story is excerpted from TIME’s special edition, The Science of Happiness , which is available at Amazon .

“Whoever said money can’t buy happiness isn’t spending it right.” You may remember those Lexus ads from years back, which hijacked this bumper-sticker-ready twist on the conventional wisdom to sell a car so fancy that no one would ever dream of affixing a bumper sticker to it.

What made the ads so intriguing, but also so infuriating, was that they seemed to offer a simple—if rather expensive—solution to a common question: How can you transform the money you work so hard to earn into something approaching the good life? You know that there must be some connection between money and happiness. If there weren’t, you’d be less likely to stay late at work (or even go in at all) or struggle to save money and invest it profitably. But then, why aren’t your lucrative promotion, five-bedroom house and fat 401(k) cheering you up? The relationship between money and happiness, it would appear, is more complicated than you can possibly imagine.

Fortunately, you don’t have to do the untangling yourself. Over the past quarter-century, economists and psychologists have banded together to sort out the hows, whys and why-nots of money and mood. Especially the why-nots. Why is it that the more money you have, the more you want? Why doesn’t buying the car, condo or cellphone of your dreams bring you more than momentary joy?

In attempting to answer these seemingly depressing questions, the new scholars of happiness have arrived at some insights that are, well, downright cheery. Money can help you find more happiness, so long as you know just what you can and can’t expect from it. And no, you don’t have to buy a Lexus to be happy. Much of the research suggests that seeking the good life at a store is an expensive exercise in futility. Before you can pursue happiness the right way, you need to recognize what you’ve been doing wrong.

Money misery

The new science of happiness starts with a simple insight: we’re never satisfied. “We always think if we just had a little bit more money, we’d be happier,” says Catherine Sanderson, a psychology professor at Amherst College, “but when we get there, we’re not.” Indeed, the more you make, the more you want. The more you have, the less effective it is at bringing you joy, and that seeming paradox has long bedeviled economists. “Once you get basic human needs met, a lot more money doesn’t make a lot more happiness,” notes Dan Gilbert, a psychology professor at Harvard University and the author of Stumbling on Happiness . Some research shows that going from earning less than $20,000 a year to making more than $50,000 makes you twice as likely to be happy, yet the payoff for then surpassing $90,000 is slight. And while the rich are happier than the poor, the enormous rise in living standards over the past 50 years hasn’t made Americans happier. Why? Three reasons:

You overestimate how much pleasure you’ll get from having more. Humans are adaptable creatures, which has been a plus during assorted ice ages, plagues and wars. But that’s also why you’re never all that satisfied for long when good fortune comes your way. While earning more makes you happy in the short term, you quickly adjust to your new wealth—and everything it buys you. Yes, you get a thrill at first from shiny new cars and TV screens the size of Picasso’s Guernica . But you soon get used to them, a state of running in place that economists call the “hedonic treadmill” or “hedonic adaptation.”

Even though stuff seldom brings you the satisfaction you expect, you keep returning to the mall and the car dealership in search of more. “When you imagine how much you’re going to enjoy a Porsche, what you’re imagining is the day you get it,” says Gilbert. When your new car loses its ability to make your heart go pitter-patter, he says, you tend to draw the wrong conclusions. Instead of questioning the notion that you can buy happiness on the car lot, you begin to question your choice of car. So you pin your hopes on a new BMW, only to be disappointed again.

More money can also lead to more stress. The big salary you pull in from your high-paying job may not buy you much in the way of happiness. But it can buy you a spacious house in the suburbs. Trouble is, that also means a long trip to and from work, and study after study confirms what you sense daily: even if you love your job, the little slice of everyday hell you call the commute can wear you down. You can adjust to most anything, but a stop-and-go drive or an overstuffed subway car will make you unhappy whether it’s your first day on the job or your last.

You endlessly compare yourself with the family next door. H.L. Mencken once quipped that the happy man is one who earns $100 more than his wife’s sister’s husband. He was right. Happiness scholars have found that how you stand relative to others makes a much bigger difference in your sense of well-being than how much you make in an absolute sense.

You may feel a touch of envy when you read about the glamorous lives of the absurdly wealthy, but the group you likely compare yourself with are folks Dartmouth economist Erzo Luttmer calls “similar others”—the people you work with, people you grew up with, old friends and old classmates. “You have to think, ‘I could have been that person,’ ” Luttmer says.

Matching census data on earnings with data on self-reported happiness from a national survey, Luttmer found that, sure enough, your happiness can depend a great deal on your neighbors’ paychecks. “If you compare two people with the same income, with one living in a richer area than the other,” Luttmer says, “the person in the richer area reports being less happy.”

Your penchant for comparing yourself with the guy next door, like your tendency to grow bored with the things that you acquire, seems to be a deeply rooted human trait. An inability to stay satisfied is arguably one of the key reasons prehistoric man moved out of his drafty cave and began building the civilization you now inhabit. But you’re not living in a cave, and you likely don’t have to worry about mere survival. You can afford to step off the hedonic treadmill. The question is, how do you do it?

Money bliss

If you want to know how to use the money you have to become happier, you need to understand just what it is that brings you happiness in the first place. And that’s where the newest happiness research comes in.

Friends and family are a mighty elixir. One secret of happiness? People. Innumerable studies suggest that having friends matters a great deal. Large-scale surveys by the University of Chicago’s National Opinion Research Center (NORC), for example, have found that those with five or more close friends are 50% more likely to describe themselves as “very happy” than those with smaller social circles. Compared with the happiness-increasing powers of human connection, the power of money looks feeble indeed. So throw a party, set up regular lunch dates—whatever it takes to invest in your friendships.

Even more important to your happiness is your relationship with your aptly named “significant other.” People in happy, stable, committed relationships tend to be far happier than those who aren’t. Among those surveyed by NORC from the 1970s through the 1990s, some 40% of married couples said they were “very happy”; among the never-married, only about a quarter were quite so exuberant. But there is good reason to choose wisely. Divorce brings misery to everyone involved, though those who stick it out in a terrible marriage are the unhappiest of all.

While a healthy marriage is a clear happiness booster, the kids who tend to follow are more of a mixed blessing. Studies of kids and happiness have come up with little more than a mess of conflicting data. “When you take moment-by-moment readouts of how people feel when they’re taking care of the kids, they actually aren’t very happy,” notes Cornell University psychologist Tom Gilovich. “But if you ask them, they say that having kids is one of the most enjoyable things they do with their lives.”

Doing things can bring us more joy than having things. Our preoccupation with stuff obscures an important truth: the things that don’t last create the most lasting happiness. That’s what Gilovich and Leaf Van Boven of the University of Colorado found when they asked students to compare the pleasure they got from the most recent things they bought with the experiences (a night out, a vacation) they spent money on.

One reason may be that experiences tend to blossom as you recall them, not diminish. “In your memory, you’re free to embellish and elaborate,” says Gilovich. Your trip to Mexico may have been an endless parade of hassles punctuated by a few exquisite moments. But looking back on it, your brain can edit out the surly cabdrivers, remembering only the glorious sunsets. So next time you think that arranging a vacation is more trouble than it’s worth—or a cost you’d rather not shoulder—factor in the delayed impact.

Of course, a lot of what you spend money on could be considered a thing, an experience or a bit of both. A book that sits unread on a bookshelf is a thing; a book you plunge into with gusto, savoring every plot twist, is an experience. Gilovich says that people define what is and isn’t an experience differently. Maybe that’s the key. He suspects that the people who are happiest are those who are best at wringing experiences out of everything they spend money on, whether it’s dancing lessons or hiking boots.

Applying yourself to something hard makes you happy. We’re addicted to challenges, and we’re often far happier while working toward a goal than after we reach it. Challenges help you attain what psychologist Mihaly Csikszentmihalyi calls a state of “flow”: total absorption in something that stretches you to the limits of your abilities, mental or physical. Buy the $1,000 golf clubs; pay for the $50-an-hour music lessons.

Most Popular from TIME

Flow takes work.

After all, you have to learn to play scales on a guitar before you can lose yourself in a Van Halen–esque solo—but the satisfaction you get in the end is greater than what you can get out of more passive pursuits. When people are asked what makes them happy on a moment-to-moment basis, watching TV ranks pretty high. But people who watch a lot of TV tend to be less happy than those who don’t. Settling down on the couch with the remote can help you recharge, but to be truly happy, you need more in your life than passive pleasures.

You need to find activities that help you get into the state of flow. You can find flow at work if you have a job that interests and challenges you and that gives you ample control over your daily assignments. Indeed, one study by two University of British Columbia researchers suggests that workers would be happy to forgo as much as a 20% raise if it meant having a job with more variety.

Not long ago, most researchers thought you had a happiness set point that you were largely stuck with for life. One famous paper said that “trying to be happier” may be “as futile as trying to be taller.” The author of those words has since recanted, and experts are increasingly coming to view happiness as a talent, not an inborn trait. Exceptionally happy people seem to have a set of skills—ones that you too can learn.

Sonja Lyubomirsky, a psychology professor at the University of California, Riverside, has found that happy people don’t waste time dwelling on unpleasant things. They tend to interpret ambiguous events in positive ways. And perhaps most tellingly, they aren’t bothered by the successes of others. Lyubomirsky says that when she asked less-happy people whom they compared themselves with, “they went on and on.” She adds, “The happy people didn’t know what we were talking about.” They dare not to compare, thus short-circuiting invidious social comparisons.

That’s not the only way to get yourself to spend less and appreciate what you have more. Try counting your blessings. Literally. In a series of studies, psychologists Robert Emmons of the University of California, Davis, and Michael McCullough of the University of Miami found that those who did exercises to cultivate feelings of gratitude, such as keeping weekly journals, ended up feeling happier, healthier, more energetic and more optimistic than those who didn’t.

And if you can’t change how you think, you can at least learn to resist. The act of shopping unleashes primal hunter-gatherer urges. When you’re in that hot state, you tend to be an extremely poor judge of what you’ll think of a product when you cool down later. Before giving in to your lust, give yourself a time-out. Over the next month, keep track of how many times you tell yourself: I wish I had a camera! If in the course of your life you almost never find yourself wanting a camera, forget about it and move on, happily.

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One More Time, Does Money Buy Happiness?

• Published: 19 September 2023
• Volume 18 , pages 3089–3110, ( 2023 )

Cite this article

• James Fisher   ORCID: orcid.org/0000-0001-9201-4204 1 &
• Michael Frechette   ORCID: orcid.org/0000-0002-8193-6796 2  

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This paper integrates multiple positions on the relationship between money and well-being, commonly referred to as happiness. An aggregation of prior work appears to suggest that money does buy happiness, but not directly. Although many personal and situational characteristics do influence the relationship between money and happiness, most are moderating factors, which would not necessarily rule out a direct link. Here, we discuss the cognitive and affective elements within the formation of happiness, which we propose play a series of mediating roles, first cognition, then affect, between money and happiness. The paper concludes with a discussion about how this proposal influences academic research and society as a whole.

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The Functional and Dysfunctional Aspects of Happiness: Cognitive, Physiological, Behavioral, and Health Considerations

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“As far as I am aware, in every representative national survey ever done a significant positive bivariate relationship between happiness and income has been found.” (Easterlin 2001 , 468). Easterlin supports this assertion with references to Andrews 1996 , xi; Argyle 1999 , 356–57; and Diener 1984 , 553.

A simple correlation of 0.2 is an oft-cited benchmark (cf. Easterlin 2001 , who labels it “highly significant”). At the same time, many researchers qualify the relationship, saying that income ultimately explains relatively little of the variance in self-reports of happiness: e.g., Ahuvia ( 2017 , 18) generalizes that “typically studies in developed economies indicate that income explains only about 3% of the difference in happiness.” Some twenty years prior to Ahuvia’s assessment, Frank ( 1997 ) offered a similar conclusion: the relationship between income and happiness is closer at lower levels of income than for middle- or upper-income households, where "variations in income explain less than 2% of variations in reported satisfaction levels” (citing Diener and Diener 1995 on 1835). Diener and Biswas-Diener ( 2002 , 123) summarize over a dozen correlations between income and subjective well-being, most ranging between 0.15 and 0.25. Kahneman and Deaton ( 2010 ) recommend that efforts to estimate the relationship between that subjective well-being and income should rely on a logarithmic transformation of income, providing a rationale based on Weber’s Law, having to do with the perception of change reflecting the percentage change and not the absolute change.

This literature review reflects the authors’ point-of-view that in answering the question of “how” money buys happiness economists have offered the highest-level, abstract answer (i.e., through a process of utility-maximization); psychologists and researchers into subjective well-being have sought a more precise accounting of what money buys vis-à-vis individual dispositions (e.g., personality) and motivations (e.g., materialism) as well as cultural or national determinants (e.g., individualism versus collectivism); and marketers and consumer researchers have inquired in the most detailed way as to how money delivers particular experiences and effects throughout the continuum of pre-purchase processes, the experience of consumption and post-purchase satisfaction.

Happiness data are a relative late-comers to economic analyses of this sort: “[T]he approach departs from a long tradition in economics that shies away from using what people say about their feelings. Instead, economists have built their trade by analyzing what people do and, from these observations and some theoretical assumptions about the structure of welfare, deducing the implied changes in happiness” (Di Tella and MacCulloch 2006 , 43). Kahneman and Krueger ( 2006 , 3) express a similar opinion: “[E]conomists have had a long-standing preference for studying peoples’ revealed preferences; that is, looking at individuals’ actual choices and decisions rather than their stated intentions or subjective reports of likes and dislikes.”.

An assertion strenuously challenged by Diener and Oishi 2000 and more modestly objected to by Frank ( 1997 , 1820), who interprets the data to say that there “is only slight evidence … that greater economic prosperity leads to more well-being in a nation.”.

Cummins ( 2000 ), in his review of personal income and subjective well-being, constructs a couple of straw men that reflect his estimation of how researchers into quality of life may view income ambivalently. At the outset of the review article, his abstract announces, "Conventional wisdom holds that money has little relevance to happiness." Later in the same review article, he identifies a bias "that can quite commonly be found within the QOL literature" (p. 139) that the rich are not as satisfied with their lot as commonly imagined. Chambers ( 1997 ) provides him with a suitable proof text in which "the link between wealth and well-being is weak or even negative" and therefore, "amassing wealth does not assure well-being and may diminish it” (at 1728 in Chambers). Cummins himself disavows this disciplinary tendency, ultimately labeling it “fanciful.”.

When it comes to terms like subjective well-being, life satisfaction, and happiness, there is some variation in the precision of the terminology. Thus, Kahneman and Krueger ( 2006 ) use life satisfaction and happiness as roughly synonymous in discussing the measurement of well-being and in emphasizing the measurement of emotional states. On the other hand, Diener may commonly use the term happiness as a convenient and widely used construct but will employ more precision in measuring or analyzing "types of well-being.".

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Happiness Articles & More

Can money buy happiness it depends on why you’re spending it, according to new research, our purchases may make us happier when they're motivated by goals we care about..

Imagine that someone gives you a cash gift and tells you that, instead of saving or investing it, you need to spend it right now. What should you put your money toward if you want to make yourself happiest?

According to past research , we’ll be happier if we spend money on an experience than if we buy a material object—like traveling or going out for a meal instead of buying the latest product we see on social media. For example, people report more gratitude when they spend on experiences rather than possessions.

On the other hand, we can all probably think of times when we’ve spent money on an experience that ended up not being worth it. Maybe you bought pricey event tickets to avoid missing out, only to realize on the day of the event that you’d much prefer a cozy night at home. Or perhaps you went out to dinner with a friend at a fancy restaurant, only to find that your friend was more focused on posting the meal to Instagram than having a deep conversation.

It turns out that there might be another factor at play beyond whether we spend money on an experience or a material item: According to a new study published in the British Journal of Social Psychology , it may also matter how our purchases align with our goals.

In the study, researchers asked 452 participants in an online survey to describe a recent purchase. They were asked to write about something they had spent money on in the last three months (ranging from about $60 to $1,200), excluding everyday expenses such as bills and groceries. After describing it, people were asked to indicate the extent to which the purchase helped to fulfill different goals. They also noted how much they felt the purchase contributed to their happiness and life satisfaction.

According to self-determination theory , goals reflect our intrinsic and extrinsic motivations. Extrinsic goals are things that other people expect for us: for example, working hard at a job not because you’re passionate about the work, but because you need the money or want a high-status job to impress others. Intrinsic goals, on the other hand, are ones that we have a strong internal motivation to pursue. In the survey, extrinsic goals included gaining wealth or social status, whereas intrinsic ones included cultivating relationships, helping other people, and contributing to growth, learning, and development.

The researchers found that, the more a purchase reflected people’s intrinsic goals, the more they thought it improved their well-being. In other words, the greatest well-being occurred when people spent money on something that was personally important to them.

To compare this finding with past research, the current study also asked participants to indicate to what extent their purchase was an experience or a material item. As in past research, participants did report higher well-being from experiences. However, when the researchers looked at both factors together, they found that how much a purchase reflected intrinsic goals explained more of the differences in well-being than whether something was material or experiential.

So, what does this research mean for our spending habits? Olaya Moldes Andrés, lecturer at Cardiff University and the study’s author, points out that we’re under a lot of pressure to spend money these days; just think about the number of targeted ads you see each time you open social media. However, this pressure to spend has a downside: In past research , Moldes Andrés has found that people who are exposed to more materialistic messages have lower well-being.

Before purchasing something, she recommends pausing to think about the reason for our purchase, and what use we will get out of it. If we’re spending money on trying to impress people or project a certain image (in other words, extrinsic goals), the purchase may not actually be worth it.

So, next time you’re planning to buy something, take a moment to think about whether it’s something you’re buying because you feel it’s what’s expected of you—or whether it’s truly something that you want.

About the Author

Elizabeth Hopper

Elizabeth Hopper, Ph.D. , received her Ph.D. in psychology from UC Santa Barbara and currently works as a freelance science writer specializing in psychology and mental health.

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Does Money Buy Happiness? Here’s What the Research Says

March 28, 2023 • 5 min read.

Reconciling previously contradictory results, researchers from Wharton and Princeton find a steady association between larger incomes and greater happiness for most people but a rise and plateau for an unhappy minority.

• Finance & Accounting

The following article was originally published on Penn Today .

Does money buy happiness? Though it seems like a straightforward question, research had previously returned contradictory findings, leaving uncertainty about its answer.

Foundational work published in 2010 from Princeton University’s  Daniel Kahneman  and Angus Deaton had found that day-to-day happiness rose as annual income increased, but above $75,000 it leveled off and happiness plateaued. In contrast, work published in 2021 from the University of Pennsylvania’s  Matthew Killingsworth  found that happiness rose steadily with income well beyond $75,000, without evidence of a plateau.

To reconcile the differences, Kahneman and Killingsworth paired up in what’s known as an adversarial collaboration, joining forces with Penn Integrates Knowledge  University Professor  Barbara Mellers  as arbiter. In a new  Proceedings of the National Academy of Sciences  paper , the trio shows that, on average, larger incomes are associated with ever-increasing levels of happiness. Zoom in, however, and the relationship becomes more complex, revealing that within that overall trend, an unhappy cohort in each income group shows a sharp rise in happiness up to $100,000 annually and then plateaus.

“In the simplest terms, this suggests that for most people larger incomes are associated with greater happiness,” says Killingsworth, a senior fellow at Wharton and lead paper author. “The exception is people who are financially well-off but unhappy. For instance, if you’re rich and miserable, more money won’t help. For everyone else, more money was associated with higher happiness to somewhat varying degrees.”

Mellers digs into this last notion, noting that emotional well-being and income aren’t connected by a single relationship. “The function differs for people with different levels of emotional well-being,” she says. Specifically, for the least happy group, happiness rises with income until $100,000, then shows no further increase as income grows. For those in the middle range of emotional well-being, happiness increases linearly with income, and for the happiest group the association actually accelerates above $100,000.

Joining Forces to Ask: “Does Money Buy Happiness?”

The researchers began this combined effort recognizing that their previous work had drawn different conclusions. Kahneman’s 2010 study showed a flattening pattern where Killingsworth’s 2021 study did not. As its name suggests, an adversarial collaboration of this type — a notion originated by Kahneman — aims to solve scientific disputes or disagreements by bringing together the differing parties, along with a third-party mediator.

Killingsworth, Kahneman, and Mellers focused on a new hypothesis that both a happy majority and an unhappy minority exist. For the former, they surmised, happiness keeps rising as more money comes in; the latter’s happiness improves as income rises but only up to a certain income threshold, after which it progresses no further.

To test this new hypothesis, they looked for the flattening pattern in data from Killingworth’s study, which he had collected through an app he created called Track Your Happiness. Several times a day, the app pings participants at random moments, asking a variety of questions including how they feel on a scale from “very good” to “very bad.” Taking an average of the person’s happiness and income, Killingsworth draws conclusions about how the two variables are linked.

A breakthrough in the new partnership came early on when the researchers realized that the 2010 data, which had revealed the happiness plateau, had actually been measuring unhappiness in particular rather than happiness in general.

“It’s easiest to understand with an example,” Killingsworth says. Imagine a cognitive test for dementia that most healthy people pass easily. While such a test could detect the presence and severity of cognitive dysfunction, it wouldn’t reveal much about general intelligence since most healthy people would receive the same perfect score.

“In the same way, the 2010 data showing a plateau in happiness had mostly perfect scores, so it tells us about the trend in the unhappy end of the happiness distribution, rather than the trend of happiness in general. Once you recognize that, the two seemingly contradictory findings aren’t necessarily incompatible,” Killingsworth says. “And what we found bore out that possibility in an incredibly beautiful way. When we looked at the happiness trend for unhappy people in the 2021 data, we found exactly the same pattern as was found in 2010; happiness rises relatively steeply with income and then plateaus.”

“The two findings that seemed utterly contradictory actually result from data that are amazingly consistent,” he says.

Does It Matter Whether Money Can Buy Happiness?

Drawing these conclusions would have been challenging had the two research teams not come together, says Mellers, who suggests there’s no better way than adversarial collaborations to resolve scientific conflict.

“This kind of collaboration requires far greater self-discipline and precision in thought than the standard procedure,” she says. “Collaborating with an adversary — or even a non-adversary — is not easy, but both parties are likelier to recognize the limits of their claims.” Indeed, that’s what happened, leading to a better understanding of the relationship between money and happiness.

And these findings have real-world implications, according to Killingsworth. For one, they could inform thinking about tax rates or how to compensate employees. And, of course, they matter to individuals as they navigate career choices or weigh a larger income against other priorities in life, Killingsworth says.

However, he adds that for emotional well-being money isn’t the be all end all. “Money is just one of the many determinants of happiness,” he says. “Money is not the secret to happiness, but it can probably help a bit.”

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Research: Can Money Buy Happiness?

In his quarterly column, Francis J. Flynn looks at research that examines how to spend your way to a more satisfying life.

September 25, 2013

A boy looks at a toy train he received during an annual gift-giving event on Christmas Eve 2011. | Reuters/Jose Luis Gonzalez

What inspires people to act selflessly, help others, and make personal sacrifices? Each quarter, this column features one piece of scholarly research that provides insight on what motivates people to engage in what psychologists call “prosocial behavior” — things like making charitable contributions, buying gifts, volunteering one‘s time, and so forth. In short, it looks at the work of some of our finest researchers on what spurs people to do something on behalf of someone else.

In this column I explore the idea that many of the ways we spend money are prosocial acts — and prosocial expenditures may, in fact, make us happier than personal expenditures. Authors Elizabeth Dunn and Michael Norton discuss evidence for this in their new book, Happy Money: The Science of Smarter Spending . These behavioral scientists show that you can get more out of your money by following several principles — like spending money on others rather than yourself. Moreover, they demonstrate that these principles can be used not only by individuals, but also by companies seeking to create happier employees and more satisfying products.

According to Dunn and Norton, recent research on happiness suggests that the most satisfying way of using money is to invest in others. This can take a seemingly limitless variety of forms, from donating to a charity that helps strangers in a faraway country to buying lunch for a friend.

Witness Bill Gates and Warren Buffet, two of the wealthiest people in the world. On a March day in 2010, they sat in a diner in Carter Lake, Iowa, and hatched a scheme. They would ask America‘s billionaires to pledge the majority of their wealth to charity. Buffet decided to donate 99 percent of his, saying, “I couldn‘t be happier with that decision.”

And what about the rest of us? Dunn and Norton show how we all might learn from that example, regardless of the size of our bank accounts. Research demonstrating that people derive more satisfaction spending money on others than they do spending it on themselves spans poor and rich countries alike, as well as income levels. The authors show how this phenomenon extends over an extraordinary range of circumstances, from a Canadian college student purchasing a scarf for her mother to a Ugandan woman buying lifesaving malaria medication for a friend. Indeed, the benefits of giving emerge among children before the age of two.

Investing in others can make individuals feel healthier and wealthier, even if it means making yourself a little poorer to reap these benefits. One study shows that giving as little as $1 away can cause you to feel more flush.

Quote Investing in others can make you feel healthier and wealthier, even if it means making yourself a little poorer.

Dunn and Norton further discuss how businesses such as PepsiCo and Google and nonprofits such as DonorsChoose.org are harnessing these benefits by encouraging donors, customers, and employees to invest in others. When Pepsi punted advertising at the 2010 Superbowl and diverted funds to supporting grants that would allow people to “refresh” their communities, for example, more public votes were cast for projects than had been cast in the 2008 election. Pepsi got buzz, and the company‘s in-house competition also offering a seed grant boosted employee morale.

Could this altruistic happiness principle be applied to one of our most disputed spheres — paying taxes? As it turns out, countries with more equal distributions of income also tend to be happier. And people in countries with more progressive taxation (such as Sweden and Japan) are more content than those in countries where taxes are less progressive (such as Italy and Singapore). One study indicated that people would be happier about paying taxes if they had more choice as to where their money went. Dunn and Norton thus suggest that if taxes were made to feel more like charitable contributions, people might be less resentful having to pay them.

The researchers persuasively suggest that the proclivity to derive joy from investing in others may well be just a fundamental component of human nature. Thus the typical ratio we all tend to fall into of spending on self versus others — ten to one — may need a shift. Giving generously to charities, friends, and coworkers — and even your country — may well be a productive means of increasing well-being and improving our lives.

Research selected by Francis Flynn, Paul E. Holden Professor of Organizational Behavior at Stanford Graduate School of Business.

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Can money buy happiness, three psychological principles to consider before you make your next purchase.

By Sarah Gervais, Associate Professor of Psychology, Social and Cognitive Program and Law-Psychology Program

11 Nov 2015

We’re all familiar with the idea that money can’t buy happiness. Yet, the reality is that we all spend money and for most of us it is a limited resource. How can we spend our hard earned dough in ways that will maximize our happiness? Psychological research offers some useful insights about the connections between money and happiness to consider before you make your next purchase.

• Being Rich Isn’t Necessarily the Path to Happiness. Money is important to happiness. Ask anyone who doesn’t have it. Having a higher income, for example, can give us access to homes in safer neighborhoods, better health care and nutrition, fulfilling work, and more leisure time. However, this only works up to a certain point. Once our income reaches a certain level and our basic needs for food, health care, safety, and shelter are met, the positive effects of money—such as buying your dream home—are often offset by the negative effects—such as working longer hours, or in more stressful jobs, to maintain that income.
• Doing Makes us Happier than Having. Most people assume that “things” will lead to more happiness than “experiences.” Physical objects—such as the latest iPhone, handbag, or car—last longer than say going to a concert, taking a cooking class, or going on vacation. Buying things does make us happy, at least in the short term. In the long-term, however, we habituate to new things and even though they may have made us excited and happy at first, eventually the item becomes the new normal and fades into the background. The happiness that comes from purchasing experiences, however, tends to increase over time. One reason is that we often share experiential purchases with other people. Even when you’ve driven that new car into the ground, you’ll still be telling stories with your family and friends about that time when you went on vacation to Colorado and you’ll even be chuckling about when the car broke down and you had to spend the night in the shady motel
• Consider Spending Money on Others. Most people think that spending money on themselves will make them happier than spending it on other people. Yet, when researchers assess happiness before and after people spend an annual bonus, people report greater happiness when they spend the bonus money on others or donate it to charity than when they spend it on themselves. This occurs regardless of how big the bonus was. One reason for this phenomenon is that giving to others makes us feel good about ourselves

So, before you pull out your wallet or click to order online, think about whether this purchase will really make you happy. If it will jeopardize your basic needs, think twice. If you have some disposable income, considering planning a trip or taking a class to learn a new skill. Finally, in this season of giving, know that if you spend your money on others or donate it to good causes, you may feel better than if you spend it on yourself.

Note: This article presents some basic principles for money and happiness. Individuals differ in their financial situation and psychological well-being. Consult a financial expert or behavioral health professional for guidance about finances and happiness.

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18 Does money buy happiness?

• Published: November 2005
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This chapter tackles the apparent paradox of wealth and happiness, which shows that average happiness levels change very little even as the average incomes of people have risen significantly over time. Subjective well-being has been traditionally measured through surveys and observable behaviour. Findings from research show that rich people are happier than poor people, that relative income affects happiness more than absolute income, and that the accumulation of more wealth would be a source of happiness provided it is spent in certain ways. Human beings' capacity for adaptation is also discussed and found to be more effective on certain stimuli than on others. Studies on the choices between conspicuous and inconspicuous consumption reveal that well-being can be significantly improved with the rational reallocation of our resources in certain ways. However, contextual differences between the two types of consumption cause seemingly irrational choices that people make regarding their well-being.

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Ask a Psychologist

Helping students thrive now.

Angela Duckworth and other behavioral-science experts offer advice to teachers based on scientific research. To submit questions, use this form or #helpstudentsthrive. Read more from this blog.

Can Money Buy Happiness? What You and Your Students Need to Know

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How important is money when it comes to happiness?

It’s less important than you might think. Here’s something I wrote recently about the topic for Character Lab as a Tip of the Week :

All parents yearn for their children to succeed in life. Mine were no exception.

When my mother was pregnant with me, she and my father were having a meal out at a Singapore hawker center—large food courts—when a French lady at a nearby table called out her son’s name— Louis .

My dad’s ears perked up. The French pronunciation of Louis is exactly the same as the Teochew dialect 镭 (lui), which means “money” (or, literally, a copper coin). As a shrewd businessman, he thought having “money” as a namesake made sense. Without further thought, my name was settled.

My parents were not obsessed with money, but they saw financial success as the foundation of a secure and fulfilling life. Scientists continue to debate the question of whether money can buy happiness. But in my research , with over 1.7 million people around the globe, I find that life satisfaction increases with earnings only up to a point.

In North America and Western Europe, for example, people are happier when they earn more, but not after they reach an annual income of $95,000. At that point, life satisfaction starts to plateau.

Why? Because income is both tangible and valuable, it’s easy to equate it with self-worth—and assume that more is always better. If you’re not fulfilled, you might think you would be if you just earned more. But higher pay often comes with greater burdens and stress. Once you make enough to put food on the table, a roof over your head, and money in the bank for your children’s education, the extra money may not compensate for higher demands and heavier workloads.

What does influence life satisfaction? Having a higher purpose beyond money—finding deep interest and meaning in your work—is a vital component.

You want children to be successful and fulfilled, and in encouraging them to choose a lucrative career—doctor, lawyer, entrepreneur, and the like—you hope it will lead to both. And it might. The danger lies in basing the decision solely on income potential.

Don’t push children toward skills or careers just because they pay well. Financial success is only one dimension of a fulfilling life.

Do encourage them to pursue their interests. When they are old enough to think about their future career, ask them, “How can you be paid to do what you enjoy doing each day?” Because success is something they will define for themselves.

The opinions expressed in Ask a Psychologist: Helping Students Thrive Now are strictly those of the author(s) and do not reflect the opinions or endorsement of Editorial Projects in Education, or any of its publications.

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Money can buy happiness: Here's how much you need and how to spend it, according to a financial therapist

• Money can buy happiness up to a point — studies indicate emotional well-being rises with income up to about $75,000.
• Researchers have also found that experiences make people happier because they enhance social relationships and are a bigger part of one's identity.
• Spending money on experiences or items that align with your values can increase your potential for happiness.
• This article was  medically reviewed  by  Alisa Ruby Bash , PsyD, LMFT, in Malibu, California. 

You know the phrase: money can't buy happiness. It turns out, that's not entirely true. Money can buy a certain degree of life satisfaction, depending on how much wealth you have and how you spend it. 

Research shows that emotional well-being rises along with income, up to a point. A 2010 study looked at surveys of 450,000 Americans and found that participants with higher incomes reported higher emotional well-being, up to an annual income of $75,000. After that, it drops off. 

Beyond simply having money, here's why being able to meet your basic needs, enjoying life experiences, and having social ties are also important factors for satisfaction and happiness in life.

Basic Needs

Lindsay Bryan-Podvin, LMSW , a financial therapist and author of "The Financial Anxiety Solution" says an annual income of $75,000 may not be the threshold for everyone. Being able to meet basic needs like food, housing, and healthcare are top priorities.  Then, the amount of satisfaction derived from income varies depending on factors like the cost of living in your area and your personal interests.

"The data is pretty clear that when we can financially take care of ourselves, our mental health is better," says Bryan-Podvin. "It's stressful to be on the grind all the time."

In fact, according to the CDC , adults living below the poverty level were three to four times more likely to have depression than adults living at or above the poverty level. 

The ability to meet basic needs without working multiple jobs also means you are more likely to have time for your friends and family, which is important for happiness. A Harvard study , which started in 1938 and tracked hundreds of men for nearly 80 years, collected data on both physical and mental well-being. The researchers found that close relationships, more than money or fame, keep people happy throughout their lives. 

Experience vs materials

Once you cover basic needs, whether money buys happiness may depend on what you spend it on, says Bryan-Podvin. 

There is a common theory that spending money on experiences will make you happier than spending money on material objects. Some studies back this up. A 2014 review found that experiences make people happier because they enhance social relationships, are a bigger part of one's identity, and are less likely to be compared to other people's experiences. 

A poll of more than 2,000 millennials in 2014 found that 78% prefer spending money on experiences or events compared to a material object. It's not just millennials. The same poll found that consumer spending on experience and events is up 70% since 1987. 

For some people, though, it may be buying a tangible item that brings the most happiness. "What research shows is if we have a very strong affinity for something, then we do get a lot of happiness out of buying that thing," says Bryan-Podvin, who gives the example of someone passionate about cars. 

When money doesn't buy happiness

One reason more money doesn't always equal more happiness is a tendency for what Bryan-Podvin calls "lifestyle creep." Meaning that when you are making more money, your expenses often go up.

For instance, you may end up spending money on things like a country club membership or dinners at more expensive restaurants. If this is happening, you may not feel like you don't have enough money even though you are making a substantial salary.  

Happiness also depends on how much you have to work to make that money. "You might be pulling in $300,000, which sounds great in theory, but if you are working 80 hours a week and can't enjoy the money you are earning, then what is the point?" says Bryan-Podvin. 

Bottom line

How much money a person needs to be happy varies. Happiness may depend on how much money is required to cover your own basic needs and what brings you joy personally.

For one person, that might be season tickets to the Yankees. For someone else, it might be a massage once a month or a new pair of running shoes. 

Ultimately, money can increase the potential for life satisfaction, depending on how you spend it. If you spend money on experiences or items that align with your values, you will increase your happiness, says Bryan-Podvin.

Related articles from Health Reference:

• How to increase dopamine levels and feel like your best self
• The best exercises to battle depression
• How to get better sleep with anxiety or stress, in 5 different ways
• The 5 types of anxiety disorder and how to know if you have one
• 5 benefits of green tea and how it can help your memory, skin, and bones

• Main content

Does Money Buy Happiness? Essay

Whether or not money can buy happiness is a continued debate. Billions of people in all parts of the world sacrifice their ambitions and subconscious tensions on the altar of profitability and higher incomes. Millions of people dream to achieve the level of wellbeing, when earning money will no longer be a problem to them. Legal or illegal does not really matter, as long as these strategies lead individuals to the desired monetary outcomes.

Professional economists assert that more money does not buy happiness. As a result, it makes no sense for people to pursue money. Yet, the reality is quite different, as money, wealth, high incomes, and wide opportunities which they open make people extremely satisfied. Based on the current knowledge of economics, the opportunity costs of pursuing money can be extremely high. Therefore, it is better to pursue money for a purpose rather than for its own sake.

People always wanted more money. Money inspired professional economists and bank robbers. Millions of people would even try to sell their souls for a reasonable sum of money. Nevertheless, the debate on whether or not money can buy happiness continues to persist. Globalization and consumerism have turned money into the main criterion of individual and professional success: the more money you earn the better person you are.

However, professional economists suggest that money does not make people happy. The current state of research claims that, despite the rapid increase in personal incomes, the percentage of people who consider themselves happy has not changed (Lee, 2005). Similar disconnects between income and happiness were found in most advanced economies, including Japan, Europe, and the United Kingdom (Lee, 2005).

However, the general inconsistency of these research results is too obvious to ignore. First, what does it mean for people to be happy? Professional economists may have profound knowledge of economic concepts but can hardly make happiness measurable. Second, can people be happy with their incomes if they always want more? Most probably, at any given point, individuals will feel dissatisfied with what they have and will try to obtain more.

I agree that money buys happiness, but this happiness is never constant. This idea is further supported by Lee (2005), who assumes that people will make all sorts of sacrifices to get money, but their happiness will be temporary at best. Lee (2005) relies on the two main premises.

First, “happiness people realize from having more income results from having more relative to others in some reference group, not from having more absolutely” (p.389). Simply stated, individuals always compare their incomes and positions to those of other individuals. They want to have more relative to what others have or can have. However, their happiness wanes as soon as others achieve a better social position, income, or level of wellbeing.

Second, the nature of sensory adaptation in humans explains why people are never happy with what they have: human receptors become irresponsive to the continuous presence of one and the same stimulus (Lee, 2005). As a result, the more money individuals earn the happier they become; however, with time, money turns into boredom and no longer brings happiness.

Obviously, it does make sense to make money, since money is the main instrument of exchange and the source of unlimited opportunities for everyone. Money opens the gateway to a broad range of material and nonmaterial values, including health and education.

We should never belittle the significance of money merely because it brings only temporary satisfaction (Lee, 2005). Yet, it is always better to pursue money for a purpose rather than for its own sake. Money for the sake of money makes little sense. Money is not the end but only the means of achieving some goal, like purchasing a new house or curing a sick child.

Moreover, a common increase in individual wealth is always a positive externality, as richer countries experience lower childbirth mortality, fewer traffic deaths, better health, and longer life expectancy (Lee, 2005). We live in society and our wealth necessarily benefits others, through taxes and charity. Therefore, it always makes sense to pursue money to improve individual and societal wellbeing.

The opportunity costs of pursuing more money can be extremely high. Opportunity costs are everywhere, as every decision necessarily involves tradeoffs. Individuals sacrifice their families and personal wellbeing to become successful, rich professionals. Others apply to illegal activities and decisions to earn their wealth. In my own life, my decision to become educated was associated with major opportunity costs. First, the costs of education impose a heavy burden of financial obligations on me.

I could use this money to meet other life goals. Second, I spend more time at work and earn more money; I lose considerable earnings each time I pursue a better grade. Third, not all courses are equally pleasant: some courses seem not to be tailored to the specific needs and demands of the student majority (Frank, 2005). I could use this time to improve my knowledge of the disciplines that are important for my future career. To a large extent, the dollar cost of education does not reflect all opportunity costs.

Yet, many students forget that higher education provides a variety of benefits that helps to decrease most, if not, opportunity costs. Statistically, college and university graduates earn $14,000 a year more compared with their non-educated counterparts (Anonymous, 2003). The social value of higher education is difficult to underestimate (Porter, 2002). Education enhances workplace productivity and stimulates professional growth. Therefore, the marginal utility of a university degree increases.

Almost all economists treat opportunity cost as the main economic concept (Frank, 2005). Every single decision is inevitably associated with one or more opportunity costs. These involve explicit and implicit costs of other opportunities (Arnold, 2008; Baumol & Blinder, 2008). Opportunity costs reflect the significance of the cost-benefit principle that governs most individual decisions (Frank, 2005). Introductory economics courses must place particular emphasis on teaching students how to weigh benefits and costs of various decisions (Frank, 2005). This knowledge of economics and economic principles will subsequently reduce the opportunity costs of education.

Whether or not money can buy happiness is a continued debate. Billions of people in all parts of the world sacrifice their ambitions and subconscious tensions on the altar of profitability and higher incomes. The current state of research claims that, despite the rapid increase in personal incomes, the percentage of people who consider themselves happy has not changed.

However, these results do not reflect the real order of things in the world. Money buys happiness, but this happiness is never constant. The more money individuals earn the happier they become; however, with time, money turns into boredom and no longer brings happiness.

Moreover, a common increase in individual wealth is always a positive externality, as richer countries experience lower childbirth mortality, fewer traffic deaths, better health, and longer life expectancy. Yet, the opportunity costs of pursuing more money can be extremely high. Every single decision is inevitably associated with one or more opportunity costs. Knowledge of economics and economic principles will subsequently reduce the opportunity costs of education.

Anonymous. (2003). Report puts dollar value on education. Georgia College & State University. Web.

Arnold, R.A. (2008). Microeconomics. Boston: Cengage Learning.

Baumol, W.J. & Blinder, A.S. (2008). Microeconomics: Principles and policy. Boston: Cengage Learning.

Frank, R.H. (2005). The opportunity cost of economics education . The New York Times. Web.

Lee, D.R. (2005). Who says money cannot buy happiness? The Independent Review, X(3), 385-400.

Porter, K. (2002). The value of a college degree. ERIC Digest. Web.

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IvyPanda. (2023, December 18). Does Money Buy Happiness? https://ivypanda.com/essays/does-money-buy-happiness/

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IvyPanda . 2023. "Does Money Buy Happiness?" December 18, 2023. https://ivypanda.com/essays/does-money-buy-happiness/.

1. IvyPanda . "Does Money Buy Happiness?" December 18, 2023. https://ivypanda.com/essays/does-money-buy-happiness/.

Bibliography

IvyPanda . "Does Money Buy Happiness?" December 18, 2023. https://ivypanda.com/essays/does-money-buy-happiness/.

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Can Money Buy You Happiness? Yes, It Can. However…

Having a higher income doesn't mean you also have enough of the other things that make you feel truly happy and wealthy (relationships, hobbies, time).

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The age-old question of whether money can buy happiness has perplexed philosophers and economists for centuries. While conventional wisdom states that money, beyond basic needs, cannot purchase a person’s search for happiness, the research paints a more nuanced picture.

I grew up frequently hearing the biblical phrase, "The love of money is the root of all evil." This warns that prioritizing money above all else corrodes the soul because money becomes one’s god. However, now that I’m in my 60s, after raising five boys and accumulating 15 grandchildren, I believe the greater danger lies in worshipping money by surrendering your autonomy to its lure and becoming enslaved to the growth of money over the pursuit of wealth (happiness).

In this context, “money” is an object or commodity, something to be controlled, whereas “wealth” is having enough: enough love, friends, hobbies, time and money. Therefore, money is a subset of wealth, not the other way around.

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Happiness plateaus at $75,000?

Foundational research in 2010 by economist Angus Deaton and psychologist Daniel Kahneman discovered that, up to a point, higher incomes correlate with greater day-to-day contentment. But this effect disappears at an annual salary of about $75,000. Beyond that level, more money does not seem to move the needle on happiness.

This research supported the paradigm of my early years. The scoop from high school and university educators was that money buys happiness to the point that basic needs are met. Think Maslow’s hierarchy of needs . After that point, increased revenue has diminishing returns. Therefore, the initial research was a rule of thumb in philosophical conversations regarding the theme of happiness and money.

Matthew Killingsworth from the Wharton School at the University of Pennsylvania recently presented findings that challenge the plateau theory . His research reveals that there is no monetary threshold at which money's capacity to improve well-being diminishes. On the contrary, its positive impact appears to persist and even increase across all income levels.

One explanation for this lies in perceived control. Money enables choices and freedoms that are hard to attain otherwise. As income grows, so do available options for how to live. This expanded autonomy and opportunity, in turn, boost well-being.

Money and subjective well-being

A collaborative analysis by scholars from the University of Pennsylvania and Princeton University unveils a complex relationship between money and subjective well-being. Their research delineates how increased earnings relate to enhanced day-to-day mood for most individuals while also identifying a subset for whom higher incomes fail to boost happiness.

Three key findings merit consideration. First, there's the notion that beyond a certain threshold, additional money ceases to significantly impact well-being. Second, an opposing perspective suggests that there is no discernible limit, with money consistently enhancing quality of life as income grows, affording greater autonomy and opportunities. Last, researchers have identified a segment for whom the level of income appears to have little bearing on happiness, regardless of how much they earn.

A constructive collaboration

Seeking to reconcile their contradictory findings, the researchers collaborated with the addition of Professor Barbara Mellers as an impartial, third-party arbitrator. Their adversarial collaboration integrated rigorous statistical analysis of previous data on both earnings and happiness levels.

Additionally, their investigative approach encouraged the direct questioning of underlying assumptions between the two camps. Through this constructive back-and-forth engagement, powered by substantial data review and a debate of ideas amongst the whole team, the aim was to reach an elevated synthesis.

So, which is it? Does the money-happiness connection fade out or keep strengthening? Killingsworth summarized it.

"For most people, larger incomes are associated with greater happiness. The exception is people who are financially well-off but unhappy. For instance, if you’re rich and miserable, more money won’t help. But for everyone else, we found increased income related to feeling happier across income levels, even into wealth.”

This aligns closely with my own findings about prioritizing money over purpose and people. When we view money as the scorecard of success or when we sacrifice too much to pursue it, our joy quickly crumbles. As Killingsworth notes, “Those equating money and success ended up unhappier despite higher pay.”

The bottom line

Surrendering one’s soul or sanity chasing dollars and glory doesn’t work. True prosperity fuses financial stability with meaning, relationships and service. If money leaves you feeling empty inside, no amount will ever fill that void.

There are currently 58 million Americans age 65 and older, and about 10,000 individuals are joining them daily. Despite this trend of more people retiring from the accumulation phase, precious little is being done to address their transition into a new lifestyle. Financial planners and their clients would benefit from shifting focus away from rates of return and concentrating on developing strategies for utilizing the accumulated money to secure a fulfilling lifestyle called wealth.

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• v.4; 2018 Apr

Does money buy happiness? Evidence from an unconditional cash transfer in Zambia

Luisa natali.

a Social and Economic Policy Unit, UNICEF Office of Research—Innocenti, Piazza della Santissima Annunziata, 12, 50121 Florence, Italy

Sudhanshu Handa

b Department of Public Policy and Carolina Population Center, University of North Carolina at Chapel Hill, NC, USA

Amber Peterman

David seidenfeld.

c American Institutes for Research, Washington, USA

Gelson Tembo

d Palm Associates Limited, Lusaka, Zambia

The relationship between happiness and income has been at the center of a vibrant debate, with both intrinsic and instrumental importance, as emotional states are an important determinant of health and social behavior. We investigate whether a government-run unconditional cash transfer paid directly to women in poor households had an impact on self-reported happiness. The evaluation was designed as a cluster-randomized controlled trial in rural Zambia across 90 communities. The program led to a 7.5 to 10 percentage point impact on women’s happiness after 36- and 48-months, respectively (or 0.19–0.25 standard deviations over the control group mean). In addition, women have higher overall satisfaction regarding their young children’s well-being, including indicators of satisfaction with their children’s health and positive outlook on their children’s future. Complementary analysis suggests that self-assessed relative poverty (as measured by comparison to other households in the community) is a more important mediator of program effects on happiness than absolute poverty (as measured by household consumption expenditures). Although typically not the focus of such evaluations, impacts on psychosocial indicators, including happiness, should not be discounted as important outcomes, as they capture different, non-material, holistic aspects of an individual’s overall level of well-being.

• • A government run unconditional cash transfer targeted to households with young children in Zambia increased women’s self-reported happiness.
• • A randomized control trial (RCT) was used to estimate causal impacts.
• • Self-assessed relative poverty is a much larger mediator of program effects than absolute poverty.

1. Introduction and motivation

‘Happiness is the meaning and the purpose of life, the whole aim and end of human existence’

In the past two decades, alternative measures of human progress beyond gross domestic product (GDP) gained importance, shifting focus from solely economic output to more holistic measures of wellbeing ( Stiglitz, Sen, & Fitoussi, 2009 ). Measures like subjective wellbeing (SWB) provide multi-dimensional and complementary knowledge of the lives and living conditions of individuals and may capture, among others, the evaluation of one’s life and levels of emotional health and happiness. Consequently, SWB has become an important and relevant outcome to understand the impact of public policy beyond monetary dimensions ( Kolev & Tassot, 2016 ). The economics of happiness, or SWB, has focused primarily on the evaluative (or cognitive) aspects of SWB (such as the assessment of life’s satisfaction) and to a lesser extent on the emotional or hedonic account of SWB (such as self-reported happiness) ( MacKerron, 2012 ). However, the concepts of life satisfaction and happiness are often used interchangeably in the literature on the assumption that these measures are highly correlated ( MacKerron, 2012 , Stevenson and Wolfers, 2008 ). 1

The relationship between SWB and income has been at the center of a vibrant debate. Generally, studies have found a positive correlation between income and SWB, a relationship that is stronger at lower income levels (at the micro level) and in poorer countries (at the macro level, albeit controversial) suggesting a diminishing marginal utility of income ( Veenhoven, 1991 , Diener et al., 1993 , Inglehart, 2000 , Frey and Stutzer, 2000 , Diener and Biswas-Diener, 2002 , Blanchflower and Oswald, 2004 ). Understanding whether income increases SWB is of intrinsic and instrumental importance. SWB is an end in itself, but it can also be a means to achieve better educational and health outcomes, improve social relationships and economic outcomes including productivity, savings and consumption ( De Neve et al., 2013 , Oswald et al., 2015 , Bryson et al., 2015 , Gutman and Vorhaus, 2012 , Guven, 2012 , De Neve and Oswald, 2012 , Goudie et al., 2014 ). SWB is also an important determinant of behavior in most spheres of life including eating habits, exercise and weight control, and smoking, all of which have important implications for both individual and societal health and welfare ( Blanchflower et al., 2012 , Pettay, 2008 , Schneider et al., 2009 , Garg et al., 2007 , Strine et al., 2008a , Strine et al., 2008b , Grant et al., 2009 , Kubzansky et al., 2012 ).

The literature on happiness and its relation to income is complex. One of the first, and most contested papers examining the income-happiness relationship concluded that better-off people tend to be happier than poorer ones within any society at a specific point in time; however, rising incomes do not make people happier (the so called “Easterlin paradox”; Easterlin, 1974 ; Easterlin, McVey, Switek, Sawangfa, & Smith Zweig, 2010 ). Hedonic adaptation (and income habituation), or the tendency to return to a relatively stable level of happiness after positive or negative events, is often used to partially explain the phenomena ( Clark et al., 2008 , Helliwell et al., 2012 , MacKerron, 2012 , di Tella et al., 2007 , Easterlin, 1995 ). The relative income hypothesis (based on Duesenberry, 1949 ) has also been put forward to explain the Easterlin paradox: it suggests that people get utility by comparing themselves with a reference group. Stated differently, the level and self-evaluation of one’s happiness depends upon relative rather than absolute income as individuals care more about their relative position in society ( Easterlin, 1974 , Clark and Oswald, 1996 , Clark et al., 2008 ). Further, it has been hypothesized that absolute income is important up to a certain threshold (until basic needs are met); beyond this level of income, more money “no longer improve individual’s ability to do what matters most to their emotional wellbeing, such as spending time with people they like, avoiding pain and disease, and enjoying leisure” ( Kahneman & Deaton, 2010 :4). 2 The debates on this relationship have continued partially because studies examining the relationship between happiness and income have been fraught with methodological constraints, thus it has been difficult to establish causality and arrive at a definite conclusion ( MacKerron, 2012 , Stutzer and Frey, 2012 ). We employ data from a cluster randomized control trial (RCT) of a government-run anti-poverty program—an unconditional cash transfer (UCT) targeted to women in households with young children—to provide new evidence on whether ‘money can buy happiness.’ The social experiment involved 2519 households over 90 clusters, that were randomized to the treatment or control condition in three rural districts in Zambia. The study design allows us to measure the effect of an exogenous increase in income on happiness—overcoming methodological constraints due to the simultaneity of emotional SWB and income. We investigate whether the program had an impact on happiness of transfer recipients, virtually all of whom are women, after 36- and 48-months of program participation (from 2010 until 2014). We complement this analysis through investigation of women’s satisfaction regarding their children’s well-being, representing both cognitive and affective SWB such as satisfaction with their children’s health and positive outlook on their children’s future.

In addition, to shed light on competing theories underlying the income-happiness relationship, we investigate two potential mediating pathways of change from the intervention to our outcome of interest: consumption expenditures (absolute poverty) versus (self-assessed) relative poverty. For example, if the relative income hypothesis used to explain the Easterlin paradox dominates emotional states in our sample, then we would expect relative poverty to be a stronger mediator of happiness as compared to absolute poverty. However, as our sample is comprised of households in extreme poverty in a resource-low setting, without resources to cover their basic needs (e.g. under the ‘threshold’), it is also plausible that absolute poverty will be a significant factor in explaining happiness.

We are not the first to utilize a cash transfer impact evaluation to answer this question. In fact, there is increasing empirical evidence showing the impact of cash on psychosocial and SWB from sub-Saharan Africa (SSA), both for large-scale Government programs, as well as for non-governmental organization (NGO) programming. Most of these studies however focus on evaluative measures (e.g. assessment of life’s satisfaction), rather than emotional measures of SWB (e.g. self-reported happiness), whereas we primarily focus on the latter. 3 One of the few studies on Government programming which we are aware of which examines emotional SWB is the unconditional Livelihood Empowerment Against Poverty (LEAP) program in Ghana, which was found to increase happiness by 16 percentage points after 24-months ( Daidone et al., 2015 ). Examining the Kenyan Government’s Cash Transfers for Orphans and Vulnerable Children, Handa, Martorano, Halpern, Pettifor, and Thirumurthy (2014) and Handa, Martorano, Halpern, Pettifor, and Thirumurthy (2016a) find strong impacts on a five-question quality of life scale from caregivers and youth (aged 15 to 25 at endline) 48 months after the onset of the program. Kilburn, Handa, Angeles, Mvula, and Tsoka (2018) find that, after 12 months of transfers, the unconditional Government Social Cash Transfer Program in Malawi had a positive impact on adult recipients satisfaction with own life as measured by a eight-question scale. Haushofer and Shapiro (2016) investigate the impacts of the NGO GiveDirectly’s UCT in Eastern Kenya and report impacts over a one-year period on a broad spectrum of outcomes: the program led to a 0.16 standard deviation (SD) increase in happiness (measured using the happiness question from the World Value Survey) and a 0.17 SD increase in life satisfaction. All these studies utilize experimental methods (RCTs), with the exception of the LEAP evaluation, which used quasi-experimental methods (matching). In addition, all programs share common features: they are all unconditional, and targeted to vulnerable rural households, thus beneficiaries represent populations in the lower income distribution in each country.

Our results show the CGP improved the happiness of women in rural Zambia; 48-months after the onset of the program the effect is around 10 percentage points or a 0.25 SD increase over the control group. This effect increases over time, despite the likelihood that a proportion of the sample has graduated from the program at 48-months. We also show that the impact on women’s happiness has been accompanied by an improvement in satisfaction regarding their young children’s wellbeing (measures which include both affective and cognitive SWB). Complementary analysis suggests that relative poverty is an important channel through which the intervention transmits its effect on women’s happiness with 39 percent of the total program effect mediated through relative poverty. Alternatively, very little of the program effect is mediated through household consumption, suggesting that even among this very poor population, relative (rather than absolute) poverty appears to be the more dominant determinant of happiness.

Our paper contributes to the broader literature on the income and happiness relationship in low-income settings, as well as the relatively new but growing evidence linking cash transfers to (emotional) SWB in SSA. The particular feature of this paper is that we focus on a sample of women still in their prime child bearing age (97 percent of our sample is aged 15 to 49 years at baseline) and who are the primary caregivers of young children. Given the important linkages highlighted in the literature between maternal mental health and child outcomes, exploring the impact on mother’s happiness is relevant as it could also in turn affect children’s well-being. In addition to having direct adverse consequences on the mothers, common maternal mental illnesses such as antenatal depression, anxiety and stress can also lead to sustained negative impacts across the lifespan on the physical, cognitive, and socio-emotional health of the foetus, infant and child ( Atif et al., 2015 , Herba et al., 2016 , Kingston and Tough, 2014 , Kingston et al., 2012 ). The study also benefits from a well implemented RCT design, enabling a clear causal argument with attribution due to the program. Finally, our results are also notable given the relatively long duration of the evaluation and potential for cash to induce sustainability of the impacts over time.

2. Child Grant Program (CGP) and evaluation design

The CGP was established by the Zambian Ministry of Community Development and Social Services (MCDSS). 4 It is a UCT implemented in three of the most remote and rural districts of Zambia characterized by high poverty, high child malnutrition, morbidity and mortality (Kaputa in Northern Province, and Kalabo and Shangombo in Western Province; see map, Fig. 1 ). The program was targeted to all households with at least one child under the age of five years at program initiation and was paid directly to the primary caregiver or mother of the target child, 99 percent of whom are women. During the study reference period (2010–2014), beneficiary households received a flat transfer of 120 Zambian Kwacha (rebased, ZMW), corresponding to roughly 24 US dollars, on a bi-monthly basis. The transfer represented an increase by almost a third (27 percent) to the household’s pre-program monthly expenditure and was calculated as an amount sufficient to purchase food equivalent of one meal monthly per day on average for all household members. The transfer was distributed through a local pay-point manager and evidence suggests that the implementation was operationally successful ( AIR, 2011 ). The primary goal of the CGP was poverty reduction, with specific objectives focusing on young children outcomes (reduction of child mortality and morbidity, stunting and wasting) and broader specific household outcomes including increasing food security and productive asset ownership.

Map of Child Grant Program study districts in Zambia.

The impact evaluation of the CGP was commissioned by the Government of Zambia and UNICEF Zambia as part of the Transfer Project, a consortium of international research partners, civil society and national governments to support improving knowledge and practice on cash transfers in SSA. The study was led by the American Institutes for Research (AIR) in collaboration with the University of North Carolina at Chapel Hill (and in later rounds, with the UNICEF Office of Research—Innocenti) and national partners Palm Associates. The evaluation was implemented using a clustered RCT whereby 90 clusters, 30 in each district, were randomly assigned to the treatment or control condition. Fig. 2 provides the flowchart of the study design. This process led to a randomly selected, representative sample of 2519 beneficiary households. Since design guidelines indicated that households with a child under five were eligible for the transfer, in the evaluation, in order to make sure that beneficiary households receive the cash transfer for at least two years, only households with a child under age three were sampled at baseline. The baseline survey was conducted in October to November 2010 during the lean season; the treatment arm received the first transfer in February 2011 and four follow-up surveys were subsequently collected at 24-, 30-, 36- and 48-months after baseline.

Flowchart of the Child Grant Program study design.

Power calculations, accounting for attrition and non-response, were carried out to determine the sample size needed to detect significant effects of the program on anthropometric measures of children zero to 59 months (the smallest subsample expected for analysis of key outcomes). Ethical review for the study was obtained by AIR in Washington, DC and the University of Zambia’s Research Ethics Committee, and informed consent procedures were observed. Household questionnaires were multi-topic and administered primarily to the primary female caregiver with assistance from other household members, where appropriate. All questionnaires, study materials and reports for the CGP detailing further aspects of study design and overall impacts evaluation findings can be downloaded on the Transfer Project website ( http://www.cpc.unc.edu/projects/transfer ).

Our analysis sample comprises all female respondents to the woman’s empowerment module that was administered to one woman per household and collects information on SWB. The target woman for this module is typically the primary caregiver of the eligible child and, in treatment communities, also the cash transfer recipient. Of the lean-season surveys, only the 36- and 48-month surveys included this question, thus we primarily utilize these two rounds in conjunction with baseline statistics. Thus, our final analysis sample is the ‘balanced’ sample of women who completed the empowerment module and had non-missing responses to key analysis indicators at both 36- and 48-months and were present in the household at baseline.

Table 1 reports the background characteristics of the analysis sample at baseline, comprised of 2203 women (1,119 in the control sample and 1,084 in the treatment sample). The mean age of women respondents is 29; around three quarters of women are married; thirty percent of recipients never attended school. The mean household size is six and as could be expected based on the eligibility criterion of the program, households’ composition is fairly ‘young’, with on average nearly two children aged zero to five years and over one child aged six to twelve years. Finally, mean monthly per capita expenditure was around 40 ZMW (approximately 30 US cents per person per day), indicating that 95 percent of the households were living below the 2010 national extreme poverty line of 90.5 ZMW per capita. Table 1 also shows, with one exception (proportion of women divorced or separated), there are no significant differences between treatment and control women in background characteristics at baseline. We therefore conclude that randomization produced balanced treatment and control groups, contributing to the internal validity of the study.

Baseline characteristics of women by study arm.

P-values are reported from Wald tests on the equality of means of Treatment and Control for each variable. Standard errors are clustered at the community level.

Another potential concern is attrition over the study period. Overall, household attrition was low at two percent at 36-months and four percent at 48-months. However, individual attrition in our sample is higher, with 12 percent of the baseline sample lost at least in one follow-up round; the attrition rate is weakly significantly higher in the treatment group (p < 0.10 level, see Table A1 in the Annex ). However, overall differential attrition by baseline characteristics does not appear to be a concern. As shown in Table A2 in the Annex , there are no significant differences between women lost to follow-up in the control group and women lost to follow-up in the treatment group across sixteen baseline characteristics tested. Therefore, we conclude that our results will have a strong degree of internal validity.

4. Methodology and key indicators

In the economics of happiness literature, the concepts of SWB, happiness and life satisfaction have often been used interchangeably ( Easterlin, 2001 ). However, these concepts, though closely related, are not synonyms. The new happiness economics mainly focuses on two concepts that distinguish between what people feel and what they think: 1) hedonic (or affective) and 2) evaluative (or cognitive) measures of SWB. The former captures positive affect or emotional states (a range of positive emotions and feelings, for instance, ‘I feel very happy’) whereas the latter, more commonly used, depicts individuals’ assessments of one’s life overall (for instance, ‘I think I lead a very positive life’) ( Helliwell et al., 2012 , MacKerron, 2012 ). Our main outcome indicator in this paper is self-reported happiness, an affective measure of SWB (Asked as: ‘Do you generally feel happy?’ ; with response options ‘yes’ or ‘no’).

In order to estimate the impact of the CGP on women’s happiness econometrically, we run a set of cross-sectional, linear probability model (LPM) regressions at 36- and 48- months. The multivariate model at time t is specified as follows:

In this framework Y i , j , t +1 is the outcome indicator corresponding to the individual woman i , in community j at t + 1; it is a dummy equal to 1 if the woman reports to feel generally happy. T j is a binary variable capturing treatment status and is equal to 1 if the community was assigned to receive the CGP, its coefficient β captures the intent to treat (ITT) estimator and corresponds to the single-difference (SD) estimator of the program impact at 36- or 48- months; X is a set of k basic regressors that are all measured at baseline (time t ); ϑ captures strata fixed effects and ϵ ijt +1 is the error term. Impact estimates use robust standard errors to adjust for clustering at the level of randomization (the community).

We report treatment effects with and without controls; in the multivariate model, we control for district fixed effects and a set of basic demographic covariates measured at baseline (reported in Table 1 ) that include: 1) women’s characteristics (age in years, age in years squared, whether the woman has ever attended school and marital status splines); and 2) household characteristics (log of household size, a set of dummies capturing household composition).

As women’s SWB is likely to be closely linked with that of their children, we complement our main analysis with analysis of respondents’ satisfaction with their children’s wellbeing. Specifically, in the 48-month follow-up, the mothers or primary caretakers were asked five statements in reference to the ‘index’ child (approximately aged three to nine at the time of the follow-up), whether: 1) they are satisfied with their children’s life; 2) their children enjoy life; 3) they feel positive about their children’s future; 4) they are satisfied with their children’s health; and 5) their children are generally happy. Their level of agreement with each of these statements is measured using a five-point Likert Scale, measured from one to five (where 1 captures strong disagreement and 5 strong agreement). These questions are modeled off the World Health Organization quality of life assessment ( WHOQOL Group, 1998 ). Strictly speaking, since these questions are asked to mothers who are evaluating their children’s lives, they could be classified as cognitive measures—however, several refer to classically affective feelings and emotions, including questions (2), (3) and (5). Therefore, for simplicity we refer to these as a mixture of cognitive and affective measures.

We replicate the main analysis for each of five questions, as well as on a scale, constructed by adding together each of the answers (ranging from 5 to 25). Similar to the main analysis, we use ordinary least squares (OLS) regression for ease of interpretation, however the results on individual indicators are robust to use of ordered probit models to take into account the ordinal nature of the Likert Scale. We present both adjusted and unadjusted model results, and in both cases control for district fixed effects and cluster standard errors at the community level. 5

5. Does the CGP have an impact on happiness?

5.1. impacts on women’s happiness.

Overall, 36 months after the onset of the program, 86 percent of the women indicated to generally feel happy, while the remaining 14 percent indicated not feeling happy. This comparatively high proportion of ‘happy’ women might seem striking given the low-income and resource-poor context, but is in line with what has been observed in other developing countries ( Banerjee and Duflo, 2007 , Case and Deaton, 2005 ). 6 More interesting is the difference between beneficiaries and non-beneficiaries: almost 90 percent of women in program participant households report to feel generally happy compared to 82 percent in the control group; at 48-months these statistics are 88 and 78 percent respectively ( Table 2 ).

Impact of the Child Grant Program on women’s happiness at 36- and 48-months.

Notes: Estimations use single difference linear probability modeling. Robust standard errors clustered at the community level are in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1 Estimations with basic controls include: woman’s age, education and marital status, household size and household demographic composition, and districts.

Table 2 presents impact estimates on women’s happiness at 36- and 48-months ( Table A3 in the Annex report the full regression including all baseline controls). After 36 months, the program significantly increased the proportion of women who generally felt happy by around 7.5 percentage points. Forty-eight months after program onset, the impact is sustained and increases to around 10 percentage points. In both cases, adjusted and unadjusted estimates are very similar. Results correspond to a 0.19 to 0.25 SD increase in happiness at 36 and 48 months, respectively.

The 48-month estimate is particularly notable given the program design guideline that stipulated that households would ‘graduate’ from the program when the target child turned five years old. Operationally, the timeliness and enforcement of this rule varied by geographical area. As our original sample contained households with children aged zero to three years at baseline, we expect that a portion of households would no longer be eligible for the transfer 48-months later. We conduct an extension to the main analysis exploiting this variation, disaggregating the sample into households that report currently receiving the transfer and those who report no longer receiving the transfer (29 percent at 48-months). Due to the compositional differences between households with different age target children, in this specification we control for the age (in years) of the youngest child in the household (who proxies for the target child). Findings reported in Table A4 in the Annex indicate that there is a positive and significant impact for both treatment arms; the impact is larger in magnitude and more strongly significant for households who report they are still receiving the cash transfer. However, the estimates are not statistically significantly different from one another. Although this evidence is suggestive, and relies on self-report of transfer receipt, and not official records, it suggests that women who no longer receive the cash transfer (e.g. may have ‘graduated’ from the program) continue to have significantly higher SWB as compared to control women.

5.2. Impacts on women’s satisfaction with young children’s wellbeing

Women report relatively high satisfaction with their children’s wellbeing, with individual indicators across five measures at an average of 4 points (they generally ‘agree’ with statements, out of five points) and the overall scale averaging approximately 20 points (out of 25 points). Results from OLS regressions are shown in Table 3 and indicate a strongly significant positive impact of the program on the overall satisfaction scale of around 0.7 points after 48-months (columns 1 and 2). Specifications 3 to 12 report the impacts of the program on each of the five measures, with the strongest positive impacts on whether their child enjoys life, satisfaction with their child’s health and feeling positive about their child’s future (ranging from 0.11 to 0.20 points). However, there is only a marginally significant impact on agreement of whether the child is generally happy (columns 11 and 12) and no impact on satisfaction with children’s life (columns 3 and 4). These results confirm that the main impacts on women’s happiness have also been accompanied by an improvement in perceived wellbeing of their children.

Impact of the Child Grant Program on women’s satisfaction with young children’s wellbeing at 48-months.

Notes: Estimations use single difference ordinary least squares modeling. Robust standard errors clustered at the community level are in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1 Estimations with basic controls include: woman’s age, education and marital status, household size and household demographic composition, and districts. Each outcome in column 3–12 reflects the woman’s level of agreement with each of these statements measured using a five-point Likert Scale ranging from one to five (where 1 captures strong disagreement and 5 strong agreement). The overall satisfaction scale aggregates across these indicators and ranges from a possible 5 to 25 points.

6. Testing pathways of relative versus absolute poverty

An obvious question given existing theories underlying the income-happiness relationship is: Through which mechanisms might the program be leading to positive impacts on happiness? Building on complementary analysis conducted using the same evaluation data, we discuss two main pathways debated in the literature, which could be responsible for this impact: 1) absolute poverty and 2) relative poverty. 7 In doing so, we review evidence from other studies conducted with the same data which estimates overall impacts on these and other domains. Following this we conduct a mediation analysis to understand the relative importance of each in mediating the total effect on happiness found using the 48-month panel. A mediator is a factor that can be influenced by the program and that has in turn an influence on the outcome variable ( Baron & Kenny, 1986 ). As such, impacts on mediators like absolute and relative poverty may help to explain the causal pathway through which the CGP affects happiness.

First, the cash transfer could exert a pure income effect (absolute poverty channel) . Following the receipt of the cash transfer, poor households have now access to economic resources that can be spent to meet their basic needs according to their preferences and constraints; this opens up opportunities and choices that might increase their level of SWB. A number of publications ( Seidenfeld et al., 2015 , Handa et al., 2016b , Handa et al., 2018 ) have shown that the CGP had a positive impact on household total consumption (both food and non-food) in the range of 20–28 percentage points (or 0.4–0.5 SD) depending on the wave examined. These results are supported by a significant negative impact of the program after 48-months on the extreme, as well as moderate poverty headcounts of 10 and 3 percentage points, respectively ( AIR, 2016 ). Positive impacts on food security scales, including food coping behaviors corroborate findings of positive impacts on food consumption ( Handa et al., 2018 ). Furthermore, the intervention had a strong and significant positive impact on additional measures of financial and economic well-being including household’s livestock ownership, ability of households to pay back long-term outstanding debts and women’s financial position, through increases in women’s cash savings ( Handa et al., 2018 , Natali et al., 2016 ).

Relatedly, we hypothesize that beneficiaries could perceive an increase in their relative position in the community or the society at large ( relative poverty channel ). Handa et al. (2018) explore the impact of the CGP on three relevant indicators, all asked to the primary female caregiver: 1) relative poverty with respect to others (external reference point) and, 2) relative poverty with respect to the past and 3) relative poverty with respect to future expectations (internal reference points). Findings indicate that there is a strong and significant impact on relative poverty, and on the probability of reporting to be better off with respect to the previous year. However, there is no significant impact on future expectations (life will be better in either one, three, or five years) ( Handa et al., 2018 ). The impacts on relative measures from past to current position are particularly interesting, as they indicate that over time, hedonic adaptation is not eliminating the positive impact of the income gains due to the cash transfer.

We estimate mediation effects by including relative and absolute poverty in the main regression at 48-months (adjusted, see column (4) of Table 2 ). According to Imai, Keele, and Tingley (2010) , to confidently estimate causal mediation, sequential ignorability must be achieved. This implies that treatment must be independent of both potential values of outcome and mediating variables. In addition, the mediators must be independent of all potential values of the outcome conditioned on the observed treatment and pretreatment covariates. The first condition is satisfied due to the experimental design of the evaluation. However, the second condition implies that mediators must also act as effectively randomized among treatment arms ( Keele, Tingley, & Yamamoto, 2015 ). Therefore, we control for all pretreatment covariates that may confound the relationship between the mediators and happiness, including pretreatment levels of each mediator (absolute and relative poverty).

For absolute poverty, we utilize the value of total monthly per-capita household consumption expenditure, measured by adding the value of over 200 food and non-food items reported by the household, converted in monthly terms, deflating to 2010 levels and logging the final value. For relative poverty we utilize a single question in the survey asking whether the respondent considered the household to be ‘non poor’, ‘moderately poor’ or ‘very poor’ using an external reference point. To standardize the direction of mediators (e.g. higher values = better off), we constructed a dummy equal to one if the respondent felt the household was comparatively less poor (e.g. ‘non poor’ or ‘moderately poor’ as opposed to ‘very poor’). We conduct mediation for each of absolute and relative poverty separately, as well as together in the same model ( Table 4 ). The inclusion of per-capita consumption reduced the treatment effect from 0.103 to 0.095, or about 8 percent, however the coefficient of per-capita consumption is not statistically significant. Alternatively, inclusion of relative poverty reduced the treatment effect to 0.063, a 39 percent reduction, and the relative poverty measure itself is a highly significant predictor of happiness. Including both mediators in the same regression led to a reduction in the treatment effect to 0.061, or a 41 percent reduction. These results suggest that even among an extremely poor population, relative poverty has an important mediating effect on SWB, and this effect appears to dominate that of absolute poverty.

Impact of the Child Grant Program on happiness at 48-month including mediators: Absolute versus relative poverty.

Notes: Estimations use single-difference modeling. Robust standard errors clustered at the community level are in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1. Estimations are adjusted and include basic demographic controls (woman’s age, education and marital status, household demographic composition, and districts) as well as the pre-treatment value of the mediators; unadjusted estimations are consistent with estimates presented here.

A critique of the mediation approach could be that the continuous nature of household expenditure operationalized here could mask important shifts as compared to the binary indicator of relative poverty. Therefore, as a robustness check, we include binary measures of moderate and extreme poverty (as per national poverty line definitions) and find similar results to those presented in Table 4 (not presented, however available upon request). A second critique of the approach of utilizing per-capita household consumption is that the measure is a general household measure and may not be specific enough to mediate women’s outcomes. A more specific specification would be able to include individual-specific consumption (e.g. women and child specific) to understand if the mediating effect of consumption depended on the type or nature of expenditure. Unfortunately, as the data collected are largely at the household level, we are unable to provide this robustness check and therefore our results must be interpreted with this caveat in mind.

7. Conclusion

Researchers have increasingly sought to understand the effects of public policies on SWB, recognizing the importance of going beyond monetary or economic dimensions of human wellbeing. Thanks to the experimental design, our results provide causal evidence that a bi-monthly, poverty-targeted UCT program improved the happiness of rural women living in remote areas of Zambia. Impacts are large at 7.5 and 10 percentage points, corresponding to a 0.19 to 0.25 SD increase in happiness at 36 and 48 months, respectively. The increase in magnitude of impact at 48-months is particularly notable, since according to official documentation, a portion of the beneficiary households should have ‘graduated’ from the program. Thus, at the same time that a sub-set of the treatment sample reports no longer receiving regular transfers, the magnitude of the overall impact increased, rather than faded out. These findings overall seem to suggest that the Easterlin paradox does not hold within our sample—money (in this case a cash transfer) did result in greater happiness. Compared with existing studies examining the impact of UCTs on self-reported happiness, our findings are broadly in line with Haushofer and Shapiro (2016) who report a 0.16 SD increase in happiness in Kenya after approximately 12-months, but lower than the 16 percentage points impact found by Daidone et al. (2015) in Ghana after 24-months. Corroborating these findings, women also have higher overall satisfaction regarding their young children’s well-being, including both cognitive and affective measures of SWB, such as satisfaction with their child’s health and positive outlook on their child’s future. These findings advance our understanding of the income-happiness relationship, as they represent impact among a unique group of reproductive-age women within a government large-scale program and examine a longer time frame as compared to existing studies.

Our results also shed light on theory concerning the income-happiness relationship. We find evidence that the relative poverty pathway dominates the absolute poverty pathway in explaining treatment effects. These results are robust to different specifications and suggest that even in a resource-low setting, without resources to cover their basic needs (e.g. below the ‘threshold’), relative poverty is a major factor explaining happiness. Overall the two indicators of relative and absolute poverty account for approximately 40 percent of the program impact on happiness, unsurprisingly indicating the majority of impact on our affective measure is realized through other factors ( Lucas and Diener, 2008 ; Tov and Au, 2013 ). As our study was not designed to explicitly measure all pathways, a comprehensive examination of all mediation factors is beyond the scope of this analysis.

There are other limitations to the analysis worth mentioning. In particular, we do not have additional standard outcomes of SWB to triangulate findings, including for example, women’s life satisfaction which is a cognitive and longer-term measure of SWB compared to our affective measure (happiness). However, we do show that the program improved women’s satisfaction regarding their young children’s life, a proxy for wellbeing and perceived quality of life of children. Additionally, as our outcomes are collected only in latter waves (36 and 48 months), we are unable to do a more rigorous analysis of changes over time. Nonetheless, our results indicate that UCTs can be a powerful tool for increasing SWB among populations of poor and vulnerable women. These impacts on happiness and SWB should not be discounted in development evaluations, as they are intrinsically linked to, and provide a complementary insight to objective and material measures of health and wellbeing.

Acknowledgements

The impact evaluation of the Zambian Child Grant Program was implemented by the American Institutes for Research and the University of North Carolina at Chapel Hill under contract to UNICEF-Zambia. The evaluation is overseen by a steering committee comprising technical staff from the Ministry of Community Development and Social Services, Government of Zambia, UNICEF-Zambia and DFID. The members of the evaluation team, listed by affiliation and then alphabetically within affiliation are: American Institutes of Research (Juan Bonilla, Rosa Castro Zarzur, Cassandra Jessee, Claire Nowlin, Hannah Ring, David Seidenfeld); UNICEF-Zambia (Charlotte Harland, Paul Quarles van Ufford); Government of Zambia (Stanfield Michelo, Vandross Luwya); UK Department for International Development-Zambia (Kelley Toole); Palm Associates (Alefa Banda, Liseteli Ndiyoi, Gelson Tembo, Nathan Tembo); University of North Carolina (Sudhanshu Handa); UNICEF Office of Research - Innocenti (Sudhanshu Handa, Luisa Natali, Tia Palermo, Amber Peterman, Leah Principe). Thanks go to Daniel Kumitz for helpful comments on a previous version of the manuscript. The views expressed in this article are those of the authors and not the policies or views of their affiliated institutions.

The CGP impact evaluation was commissioned by the Government of Zambia (GRZ) through the Ministry of Community Development and Social Services (previously, Ministry of Gender, Children and Mother and Child Health) to the American Institutes of Research (AIR) and the University of North Carolina at Chapel Hill (UNC) and funded by a consortium of donors including DFID, UNICEF, Irish Aid, and the Government of Finland. Additional funding from the Swedish International Development Cooperation Agency (G41102) and from DIFD (grant number 203529-102) to the UNICEF Office of Research-Innocenti was received for analysis of the data and drafting of the manuscript.

Ethical review

Ethical review for the study was obtained by the American Institutes for Research (AIR) in Washington, DC and the University of Zambia’s Research Ethics Committee, and informed consent procedures were observed.

1 For practical reasons, we generally follow the same approach in reference to reviewing relevant literature, unless a measurement distinction is made by authors between the two concepts.

2 However, this same conclusion does not hold for life evaluation, which increases with income even at higher income levels. The authors believe these results reflect the distinction between the concepts of life evaluation and emotional wellbeing; the former captures what individuals think about their life (cognitive measure) and is therefore more responsive to socioeconomic status, whereas the latter captures how individuals feel (affective measure) and is therefore more responsive to situations that bring emotions such as spending time with friends or family and so on ( Kahneman & Deaton, 2010 ).

3 Other papers have investigated the impact of cash transfers on related outcomes including mental health, however we do not review findings explicitly here ( Kilburn et al., 2016 , Baird et al., 2013 , Haushofer and Shapiro, 2016 ).

4 At the time of the evaluation, Ministry of Community Development, Mother and Child Health (MCDMCH).

5 These specifications are run on a slightly smaller sample than the happiness estimations. Approximately one percent of women in our original panel sample (22 out of 2203) had to be dropped due to missing outcome values.

6 These levels could also be influenced by social norms and cultural bias. Veenhoven (2012) discusses both the possibilities of cultural bias in the measurement of happiness (which includes issues such as translation, desirability bias, response styles and unfamiliarity) and the cultural relativity thesis of happiness (which reflects the idea of happiness as a social construction; as notions of the good life vary over time and across cultures, so happiness could be expected to be culturally relative). However, it should also be noted that the internal validity of our findings is not affected by these cross-country biases since we are comparing groups in rural areas of the same country—and thus these discussions go beyond the scope of this paper.

7 There are many more indicators which could be tested as mediators, however as the list is almost infinite and many analyses have already been conducted on impacts across domains using this evaluation, we focus on these two factors and complement the analysis by discussion of existing literature.

See Table A1 , Table A2 , Table A3 , Table A4 here.

Individual attrition rates of women by treatment arm over the study period.

P-values are reported from Wald tests on the equality of means of Treatment and Control for each variable. Standard errors are clustered at the community level. Analysis considers the attrition rate among the balanced panel of women interviewed at baseline, and loss to follow-up over 36-months and 48-months.

Testing individual differential attrition women over the study period by baseline characteristics.

Overall N for control is 1246. Overall N for treated is 1246. *** p < 0.01, ** p < 0.05, *** p < 0.1; T-tests based on standard errors clustered at the community level. Analysis considers the attrition rate among the balanced panel of women interviewed at baseline, and loss to follow-up over 36-months and 48-months.

Notes: Estimations use single difference linear probability modeling. Robust standard errors clustered at the community level are in parentheses. * p<0.1, ** p<0.05, *** p<0.001 All controls are measured at baseline.

Impact of the Child Grant Program on women’s happiness at 48-months by graduation status.

Notes: Estimations use single difference linear probability modeling. Robust standard errors clustered at the community level are in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1 The excluded dummy is “Household has child 0–12 months at baseline”. Estimations also include as basic controls: woman’s age, education and marital status, household size and household demographic composition, and districts; a dummy for households with child with missing age at baseline has been included.

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Can Money Really Buy Happiness? the Answer Is Complicated

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While money can buy some happiness through meeting basic needs and enjoyable experiences, it cannot purchase meaning, love, or inner fulfillment - the deeper keys to lasting happiness.

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